7th August, 2020
New analysis from IBISWorld shows how Stage 4 restrictions will have long-lasting impacts for both the Victorian and national economies.
Victorian businesses are struggling to remain afloat after Stage 4 lockdowns have been brought in to prevent people leaving their homes for everything but a few excepted purposes. Authorities are even enforcing a strict 8pm nightly curfew, curtailing hospitality and after-hours trade in Melbourne.
The move to introduce more lockdowns to prevent the spread of COVID-19 comes is set to prove to be a blow to a number of industries already crippled by loss of trade this year.
Analysis by IBISWorld reveals that the Stage 4 restrictions will have a major and long-lasting impact on both the Victorian and national economies.
In Victoria, 250,000 employees are expected to be stood down this week alone, according to IBISWorld Senior Industry Analyst, James Caldwell. The imminent job losses will be concentrated in the retail, wholesale, construction and manufacturing sectors.
The research is broken down by industry sector.
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Essential retail industries, including food, medicine and utility retailing will remain open throughout Stage 4. Virtually all other retail activity will transition to online delivery and contactless pick-up operating models throughout the six-week period.
Online shopping has increased since the first wave of COVID-19 in April 2020. An average of 1.6 million Australian households bought something online each week in 2019; in April this figure increased to 2.5 million households per week.
In fact, Australia Post reveals that parcel volume growth is up 90 percent on last year in recent months. The national carrier has even repurposed 15 new processing facilities to help manage parcel delivery volumes.
“Victoria exhibited the strongest increase in online shopping behaviour relative to other states, and Victorians are expected to continue taking up online shopping throughout lockdown,” said Caldwell.
In 2018/19, the construction sector accounted for 7.8 percent of Victorian GDP, or approximately $34.8 billion. In May 2020, the sector employed over 300,000 Victorians, accounting for close to nine percent of all employment in the state.
“The construction division is expected to decline by 4.0 percent in 2020/21, following a decline of 5.1 percent in the prior year.
“While construction activity will be significantly reduced throughout the six-week period, activity is expected to rebound in the final quarter of the year,” said Caldwell.
Manufacturing in Victoria accounted for close to 13.0 percent of GSP in 2018/19. Several key manufacturing industries will be will be closed in metropolitan Melbourne, while others will move to restricted operations.
In particular, meat product manufacturers will be subject to tough restrictions, following COVID-19 outbreaks at these facilities in recent months. These facilities will reduce output by a third.
“The long term risks for Victorian manufacturing are high, given the potential for downstream markets to pivot to alternative product suppliers during the six-week lockdown,” said Caldwell.
The loss of economic activity across most Victorian industries will prove a devastating blow for the national economy. The second wave of COVID-19 has delayed interstate travel resumption, with border restrictions still enforced for most states and territories.
Plans to implement an international travel bubble with New Zealand has been effectively abandoned, extending the economic pain for the tourism sector. Consumer sentiment and business confident has also been stifled.
If successful, this latest lockdown could position Australia for a stronger rebound in the last quarter of the year. But, Caldwell predicts that state governments will likely be cautious in relaxing restrictions, given the hard lessons learned by Victoria’s failure to contain the virus.
Meanwhile, businesses and workers in Victoria are being thrown a lifeline by the Federal Government, which has announced a $15 billion expansion of the JobKeeper program.
Around $13 billion of what will go to Victoria, with an extra 500,000 Victorian employees doing onto JobKeeper through the September quarter.