The introduction of lockdowns and border closures over the threat from the highly infectious UK strain of COVID-19 has triggered another wave of doomsday economic forecasts from industry groups.
Advocacy group Committee for Brisbane this week warned that the cost of an extended lockdown in the city could cost “billions”, although its fears were allayed after the Queensland state government announced on Monday it would ease restrictions.
Tourism operators told The Australian that border closures between Western Australia and other states had smashed confidence. They said national tourism revenue for the holiday period had dropped “at least $3 billion” compared with a year ago, with regions such as far north Queensland losing “$8 million a day”.
The new round of dire warnings echoes pleas from business groups and even Treasurer Josh Frydenberg in August to end Victoria’s second lockdown to stem the economic fallout.
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Back then Prime Minister Scott Morrison used figures from Treasury to estimate that the Victorian lockdown would cost “between $10 and $12 billion”, a figure picked up by the Australian Industry Group as evidence for the need to end the lockdown.
But how much do lockdowns and border closures actually cost?
Economists say working out the true financial cost of shutdowns is much harder than it sounds.
Not only is it difficult to separate the cost of a lockdown versus the cost of the virus (people might stay away from shops even when there are no restrictions), there’s also the question of whether to include economic stimulus packages like JobKeeper and JobSeeker as a cost or a benefit to the economy.
On the one hand, they end up costing the government billions. On the other hand, they unlock a stream of income for Australians, many of whom have spent up big during the pandemic.
“You can basically create any number you like,” economist and Crikey contributor Jason Murphy said. “It’s a highly elastic thing.”
Then there’s the accidental positive outcomes of a lockdown, such as lower flu deaths, which might translate into financial benefits on the health system. And stimulus spending on infrastructure projects such as social housing, like in Victoria, means more jobs and the positive economic effects that flow from giving people homes to live in.
In Victoria there was also the ratings downgrade that will affect how much it costs the government to fund its post-lockdown economic stimulus.
In the case of a short lockdown like Brisbane’s, people may simply defer spending until after restrictions ease.
Ultimately, it’s not as easy as saying keeping people at home will devastate the economy. And as economist Saul Eslake says, a temporary shutdown is always going to cost less than letting the virus ravage the community.
“It’s pretty clear from evidence from other countries that there isn’t any simple trade-off between locking down and not,” he said.
“If you don’t get the virus under control, then the economy will suffer.”