(Image: AAP/David Crosling)

After weeks of self-congratulation and a general feeling of Australian exceptionalism, we’re suddenly back facing a potential nightmare scenario where a major economy has to lockdown again as this highly infectious virus threatens a fresh breakout.

A second lockdown would be an economic double-tap — shuttering services and business just as they were reopening, accelerating the rise in unemployment and likely sending a lot of small businesses, which barely survived the first lockdown, into bankruptcy. All while the second round of employment impacts in areas like construction are only just becoming manifest.

Nor is Victoria well placed to deal with even a slowdown in the removal of restrictions, let alone a return to lockdown: unemployment jumped from 6% to 6.9% in May, well above NSW (and Tasmania) on 6.4%. Victoria had the lowest state growth in jobs in the last week of May, and it was the only state where total wages went backwards.

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In the international context, Victoria’s run of ~20 new cases a day is minimal. But the speed with which an outbreak can accelerate, and the lack of a closed border with NSW, means the potential for a significant outbreak — by Australian standards — in the two most populous states will deeply worry policymakers.

The best case scenario is Victoria suppresses the outbreak with the same efficiency that Australia dealt with the initial outbreak, meaning there is only a slight delay in reopening the state’s economy.

Whether Victorians or the rest of us will be as tolerant and strict about lockdown a second time, however, isn’t clear. Polling two weeks ago suggested that voters in Victoria, NSW, SA and (to a slightly lesser extent) WA all thought that the pace of reopening was about right, with only a small minority — ~10% or less — thinking it was too slow. Even in Queensland, where there’s a greater appetite for faster removal, less than a quarter of voters think things are moving too slowly.

That said, a trip around Sydney on the weekend suggests that stated and revealed preferences might be at odds: traffic is almost back to its dire normal, no one is bothering to maintain social distancing in public spaces, and many cafes and restaurants don’t seem to be too fussed about adhering to the letter of the law around numbers and distances.

The Victorian spike may be trouble for Daniel Andrews — hitherto criticised for being too draconian in lockdown, now attacked for not being draconian enough — but his government is also well regarded for its handling of the crisis, with 72% of voters declaring it “good”, ahead of NSW and Queensland.

But it may complicate things terribly for Scott Morrison, too. All of the debate so far around when temporary stimulus should be brought to a halt have been predicated on the idea of Australia moving relatively uniformly into a post-pandemic phase.

What happens if we have a two-speed recovery? If Victoria has to stay locked down for significantly longer than NSW or Queensland, leaving unemployment much higher and the business landscape considerably worse?

If JobKeeper could be extended for certain badly-hit industries, as the government has hinted it may be willing to consider, what about extending it for badly hit regions and states? And how will that go down with other states?

And what happens if a further outbreak requires lockdown in another state, down the track? The whole idea of a uniform national pandemic, rather than six state pandemics, or who knows how many regional pandemics, may end up proving unrealistic as waves of infections come and go

We should all cross our fingers that Victoria gets on top of the spike quickly — Scott Morrison and Josh Frydenberg more than most.

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Peter Fray
Peter Fray
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