Sydney lockdown seen slicing 0.1% off Australia's GDP

SYDNEY: A two-week coronavirus lockdown in Sydney, Australia's most populous city, will likely hit the country's GDP by about A$2 billion ($1.5 billion) while the slow nationwide vaccine rollout hangs heavily on the economic outlook.

Currently, around 18 million Australians, or around 70% of the population, are under some form of lockdown or coronavirus-related restrictions as officials grapple with infections in almost every state or territory.

Australia's vaccine rollout has been slower-than-anticipated with only about a quarter of population receiving at least the first dose compared with more than 50% in the United States and Singapore and 66% in the United Kingdom.

"The outbreak clearly highlights that until the vaccine rollout is completed the pandemic will remain a source of downside risk," Sean Langcake, principal economist at Oxford Economics, wrote in a note titled 'New COVID ripple will dent but not derail economy'.

Langcake did not provide an estimate of the damage to the broader economy from the current lockdown in Sydney.

Morgan Stanley and AMP estimate a A$2 billion hit to the economy from the two-week Sydney lockdown, equal to about 0.1% of annual gross domestic product.

New South Wales state, of which Sydney is the capital city, represents around a third of Australia's economic activity.

Australia's A$2 trillion economy rebounded sharply late last year after slipping into its first recession in three decades, helped by its early success in curbing the pandemic and massive fiscal and monetary stimulus.

However, the country has since been plagued by numerous small outbreaks, leading states or territories to briefly tighten mobility restrictions or impose snap lockdowns.

AMP chief economist Shane Oliver said the latest coronavirus-related lockdowns in Australia mean the country's central bank will be "relatively cautious" in July.

The Reserve Bank of Australia (RBA) will hold its next monthly meeting on July 6 where it had been widely expected to announce a shake-up of its stimulus policies, including a decision on future bond purchases.

The coronavirus-induced border closures and lockdowns in Australia will have an enduring impact on government coffers and population growth, according to official forecasts released on Monday.

The Australian government's "Intergenerational Report 2021" forecast the budget will remain in deficit for at least another 40 years.