Sydney has been locked down for nearly a month now, and it looks like its residents and business owners will need to hold on for just a little bit longer, because the lockdown is being extended once again.
While restrictions have been eased in Melbourne and Adelaide - practically all of Australia's state capitals have been locked down to combat the delta variant, which has infected...only a few hundreds people across the entire country - authorities in New South Wales officially extended the lockdown in Greater Sydney for at least another four weeks.
The reaction, and its economic consequences, are unprecedented anywhere in the developing world. Australia, a country of roughly 25MM, is only seeing 167 new cases a day on average over the past week, Nikkei reports.
So far, it appears the lockdowns haven't done much to curb the spread. Meanwhile, economists are all but certain Australia's $1.5 trillion economy will shrink by 25% during the current quarter. Some fear that a double-dip recession might result "if the current lockdowns spread around Australia and last into the December quarter," said AMP Capital chief economist Shane Oliver in a note to clients. Australia suffered its first economic downturn in about three decades in 2020, breaking one of the world's longest streaks of uninterrupted economic growth.
"Overall, we rate the risk of a renewed recession as being around 25%."
There's reason to suspect that Sydney's lockdown might last for many weeks to come. Australia's government famously has a "zero tolerance" approach to COVID, something that's diametrically opposed to "the science". Presently, scientists believe COVID will remain endemic to the human population for the foreseeable future - perhaps forever.
Economists at Goldman Sachs pointed to Australia's relatively low vaccination rate of 12% of the adult population, and the risks posed by the delta variant's high infectiousness as reason to suspect that the lockdown might last "materially longer" than many had expected when it began.
Of course, this means the money tap will need to remain open. The RBA is expected to reverse its decision to start tapering monetary support at its meeting next Tuesday. It's also expected to downgrade its near-term growth and labor-market projections.
Capital Economics put it even more bluntly: "New South Wales 'will probably be in lockdown for at least two months and many businesses will have to shut altogether," Capital Economics senior economist Marcel Theiliant warned in a note before the extension. "Under those circumstances, wage subsidies are unlikely to prevent large-scale job losses.'"
With the country's unemployment rate expected to spike, the Australian government is clearly eager to double down on its "zero tolerance" approach, despite the economic devastation it will reap, even as the lockdowns appear to have little impact on the rate of viral transmission.