As national cabinet met on Monday to hear from New Zealand Prime Minister Jacinda Ardern about the prospect of trans-Tasman flights resuming, lifting more lockdown restrictions is also on the agenda.
Treasurer Josh Frydenberg will outline the growing cost of closing restaurants, retailers, and keeping workers quarantined at home is forecast to hit $50 billion in a speech to the national press club on Tuesday.
“We must get people back into jobs and back into work,’’ he says.
“For every extra week the current restrictions remain in place, Treasury estimates that we will see close to a $4 billion reduction in economic activity from a combination of reduced workforce participation, productivity, and consumption.
“History shows that the longer people are unemployed, the harder it is to get a job. In the early 1990s, unemployment increased by 5 per cent over three years, but took seven years to get back to its pre-crisis level.
“As has been remarked, unemployment went up in the elevator, and went down by the stairs.”
Mr Frydenberg will argue Australia is well-placed to bounce back because it has contained the virus.
But he will warn the unemployment rate is still forecast to double to around 10 per cent in just three months.
“It underlines the importance of getting people back to work as soon as possible to avoid the long-term economic and social impacts from a high unemployment rate,’’ he says.
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Confirming that the economy is on track to enter into the first recession since the 1990s, the Treasurer will reveal for the first time that the economy is now forecast to go backward in the June quarter.
The formal confirmation of whether Australia is in a recession can only be determined when there are two consecutive quarters of negative growth. The March quarter figures will be released in June.
Gross Domestic Product is expected to fall significantly with Treasury forecasting a 10 per cent fall in the June quarter, the equivalent of around $50 billion.
If Australia had introduced an Italian-style lockdown for two months, the adverse impact on GDP would double to 24 per cent, or $120 billion, in the June Quarter.
“This would have seen enormous stress on our financial system as a result of increased balance sheet impairments, widespread firm closures, higher unemployment and household debt. This was the cliff we were standing on,’’ Mr Frydenberg says.
“Notwithstanding Australia’s success to date on the health front, and the unprecedented scale and scope of our economic response, our economic indicators are going to get considerably worse in the period ahead before they get better.
“Some of the hardest-hit sectors like retail and hospitality are among the biggest employers, accounting for more than two million employees between them.”
Despite the panic buying of household goods in March, Australia’s credit card data confirms spending is plunging.
“Recent credit card data from the banks shows that spending on arts and recreational services, accommodation and food services were down around 60 per cent and 70 per cent respectively in late April compared to the previous year,’’ Mr Frydenberg says.
“Despite the toilet paper boom and the record increase in retail trade in March due to panic buying, overall consumption, according to NAB data, has fallen 19.5 per cent since the start of the year, with declines across all jurisdictions. Victoria has had the steepest fall of 23 per cent followed by the ACT (20.7 per cent), WA (20.5 per cent), NSW (20.4 per cent), Queensland (18 per cent), South Australia (16.8 per cent), Northern Territory (15 per cent) and Tasmania (14.9 per cent). “
“The economic shock the world is confronting dwarfs the Global Financial Crisis.
“Reassuringly, National Cabinet has signalled that from this Friday, it will assess more opportunities for easing restrictions, building on decisions already taken to date, such as around elective surgery, or in some states, limited gatherings, and visitations.”
Central to the back-to-work strategy is reopening schools. That’s already happened in WA, SA and the Northern Territory where a majority of students are now attending the classroom again.
In Queensland, that will now occur later this month with NSW also planning a staggered return to classes.
Only Victoria and Canberra currently plan to keep most children away from classes for Term 2.
But as Victoria reported a new confirmed COVID case involving a teacher and NSW confirmed a 7-year-old schoolboy attending a public school had tested positive, NSW Premier Gladys Berejiklian warned Australians should expect more cases as schools reopen.
The Warragamba Public School student had mild symptoms, and the campus was closed for intensive cleaning.
“I say to parents and teachers and school communities, this is likely to occur on a more regular basis when schools go back,” the NSW Premier said.
“I anticipate it will happen more frequently but please have confidence we’ve gone through the processes and we know what takes to keep everyone safe when this occurs.”
Samantha Maiden is news.com.au’s national political editor | @samanthamaiden