CANBERRA, AAP – Treasury boss Steven Kennedy says the COVID-19 outbreak in Melbourne reinforces the point the pandemic is not over and as such there are heightened risks to Australia’s recovery.
Victoria’s seven-day lockdown has sent confidence reeling among Australians, a worry for retailers and the economy more broadly.
In its latest economic outlook, the Organisation for Cooperation and Development expects Australia to enjoy strong 5.1 per cent growth in 2021, but warned this could be at risk if the COVID-19 vaccine is not widespread.
Dr Kennedy told a Senate hearing in Canberra high vaccination rates reduced health risks, which is important for confidence more broadly in the community.
“If people feel the health situation is well managed, and part of that is the vaccination program, they will feel confident to go about their activity and that will be strong for the economy,” he said on Tuesday.
The weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – dropped 2.5 per cent.
Confidence tumbled 3.8 per cent in Melbourne, while there were even bigger falls in Sydney and Brisbane.
ANZ economist David Plank said past surveys showed short lockdowns did not have a lasting impact on consumer sentiment.
“This offers the prospect that even an extension of the current lockdown may not have too dramatic an impact on consumer sentiment,” Mr Plank said.
“Of course, the absence of JobKeeper for this episode means we need to be alert to worse results than the experience to date.”
The JobKeeper wage subsidy scheme ended in March.
Meanwhile, the Australian Bureau of Statistics published a spread of reports that will enable economists to finalise their forecasts before the national accounts are released on Wednesday.
Prior to the data, forecasts centred on a 1.1 per cent increase for the March quarter.
The ABS figures showed the account trade surplus grew to a record high of $18.3 billion in the quarter due to the strength of commodity prices, although export volumes increased only modestly.
“Import volumes also increased, which is a positive sign for domestic demand moving forward,” Sean Langcake from BIS Oxford Economics said.
The increase in imports was larger than exports, resulting in net exports subtracting 0.6 percentage points in the quarter.
Other data showed while company profits declined 0.3 per cent in the March quarter, the wage and salary bill for firms rose two per cent.
Separately, the manufacturing sector continues to grow in May, fuelled by strong construction figures, a pick-up in business investment and healthy demand from households.
“While the new Victorian lockdown will dampen enthusiasm somewhat, these conditions are likely to be setting the stage for a lift in investment by manufacturers,” Ai Group chief executive Innes Willox said.
The Australian Industry Group performance of manufacturing index rose by a further 0.1 per cent in May to 61.8, an eighth consecutive month of recovery following last year’s coronavirus restrictions.