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Jobless Surge in Australia’s Virus Hotspot State Sparks Tensions

Jobless Surge in Australia’s Virus Hotspot State Sparks Tensions
Jobless Surge in Australia’s Virus Hotspot State Sparks Tensions
Garfield Reynolds and Jason Scott

(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. Victoria Premier Daniel Andrews later announced he intended to provide a “detailed roadmap” out of the lockdown on Sept. 6.

The number of Victorians receiving unemployment benefits has risen by 27,600 since June 26, a 7.2% increase, and more than half of that total was recorded in the three weeks ended Aug. 21, according to the federal Treasury. The state imposed severe restrictions on Aug. 2 as the pace of Covid-19 infections climbed.

Prime Minister Scott Morrison’s federal government is concerned the lockdown in the state, which accounts for about 25% of the nation’s GDP, will exacerbate stresses on an economy that’s tipped into its first recession in almost three decades. Frydenberg, who is crafting a budget to be delivered on Oct. 6, is leading calls for 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, 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 73 new cases on Monday 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. That’s playing havoc on businesses involved in transport, tourism and other sectors.

Premier Andrews said on Monday that his government will this week collate more data and consult with businesses, unions and community groups before announcing his plan to ease restrictions.

“There will be number of key principles that underpin this opening up roadmap including physical distancing, making sure staff work from home wherever possible and limiting the total number of staff and customers in any enclosed area and stopping car pooling,” he said. Measures also likely to be enforced include wearing a face covering at all times in the workplace and making sure protective equipment is used in higher risk industries.

The Reserve Bank of Australia 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 ($5.9 billion) since then.

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 categorize 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% year-to-date, from flat mid-July, even as Australia-wide it has declined 3%, the Treasury said.

(Updates with Andrews’ comments in 7th, 8th paragraphs.)

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