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Jobless surge in Australia's coronavirus hotspot Victoria state sparks tensions

MELBOURNE (BLOOMBERG) – The coronavirus lockdown in Australia’s Victoria state caused an immediate slump in consumer spending and a surge in job losses this month, prompting the federal government to call for the leader of the second-most populous state to announce a plan to reopen the economy.

“This has to be the biggest public policy failure by a state government in living memory,” Treasurer Josh Frydenberg told reporters in Canberra on Monday (Aug 31).

The number of Victorians receiving unemployment benefits has risen by 27,600 since June 26, a 7.2 per cent increase, and more than half of that total was recorded in the three weeks ended Aug 21, the federal Treasury said Sunday in an e-mailed statement.

The state imposed severe restrictions on Aug 2 as the pace of Covid-19 infections climbed, with the latest wave peaking Aug 4 at 687 new cases.

Prime Minister Scott Morrison’s federal government is concerned the lockdown in the state, which accounts for about 25 per cent of the nation’s GDP, will exacerbate stresses on an economy that’s tipped into its first recession in almost three decades.

Mr Frydenberg, who is crafting a budget to be delivered on Oct 6, is leading calls for Victoria Premier Daniel Andrews to announce a plan to quickly allow businesses to reopen as restrictions bring the pandemic under control.

“We now need the Victorian government to provide more detailed answers and a more detailed road map” out of the lockdown, Mr Frydenberg said on Monday in a radio interview. “Outside of Victoria, jobs have come back and the virus has been controlled.”

The resurgence of the coronavirus in Victoria, which recorded 114 new cases on Sunday amid a wave of fatalities in its aged-care facilities, has prompted leaders of other states and territories to enforce hard border restrictions for the first time since the Spanish Flu pandemic a century ago.

On Monday, it detected 73 new infections in the past 24 hours, while the death toll rose by 41, bringing the total infections in Australia to nearly 26,000 while fatalities stood at 652.  

That’s playing havoc on businesses involved in transport, tourism and other sectors.

Premier Andrews said at the weekend that while the downward trend in new infections in his state was promising, it was too early to announce a plan to ease restrictions and virus case numbers would “explode” if the lockdown was lifted too soon.

The Reserve Bank of Australia (RBA) said this month it expects the economy’s recovery to be slower due to the “major impact” of the lockdown in Victoria.

The RBA resumed buying government bonds on Aug 5 after a three-month hiatus, and has purchased A$8 billion (S$8 billion) since then.

Mr Morrison’s conservative government is calling for the states to dismantle restrictions at their borders. The prime minister at the weekend said he was investigating installing a new system that could instead categorise regional areas or cities as virus hotspots with mandatory restrictions, leaving other areas within their state with low community transmission to operate relatively normally.

The federal government expects that more Victorians will be using its JobKeeper program – which pays companies for retaining workers – in the December and March quarters than the rest of Australia combined.

Victorian household spending is now down 30 per cent year-to-date, from flat mid-July, even as Australia-wide it has declined 3 percent, the Treasury said.

Mr Morrison’s government is aiming to pass legislation this week to reduce unemployment benefits, which were bolstered at the start of the pandemic, to a lower level in a bid to encourage people back into the workforce.

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