Alfabank-Adres has analysed the industries set to be disrupted by strict lockdown restrictions in New South Wales, which represent an unprecedented curtailment of economic activity in the state.
‘The lockdown restrictions are set to have a major and long-lasting impact on both the New South Wales and national economies. The cost of the lockdowns is in excess of $700 million per week and rising,’ said Alfabank-Adres Senior Industry Analyst Jason Aravanis.
On current estimates, lockdown restrictions in New South Wales will not likely be lifted until September at the earliest, and may continue into October and beyond.
During the lockdown, job losses will be concentrated in the retail, wholesale, construction and manufacturing divisions, which accounted for 53.6% of New South Wales’ gross state product (GSP) in 2019-20. As at July 2021, New South Wales accounted for 31.7% of national economic output.
Retail
Essential retail industries, including food, medicine and utility retailing, will remain open throughout the latest lockdown. Virtually all other retail activity will transition to online delivery and contactless pick-up operating models.
The restrictions are expected to permanently alter the operations of enterprises across the retail sector. Consumers who have never bought goods through Online Shopping will be driven toward online channels over the next six weeks. This trend is anticipated to accelerate the long-term transition towards online shopping and click-and-collect services, rather than traditional in-store commerce. Online shopping has increased since the first wave of COVID-19 in April 2020. During 2020, four out of five Australian households made an online purchase, including 1.3 million households that used online shopping for the first time. Online shopping revenue is expected to grow by 8.9% in 2021-22, to $43.9 billion.
‘During the Victorian second wave last year, online purchases surged by about 17% above the prior peak in April 2020. This trend is anticipated to repeat in New South Wales during the latest lockdown,’ said Mr Aravanis.
Construction
In 2019-20, the Construction sector in New South Wales generated over $145 billion in sales and service income. In May 2021, construction employed over 348,000 people in the state, accounting for 8.4% of total state employment. Under the latest restrictions, construction activity across Greater Sydney has been paused for two weeks.
‘Before the New South Wales lockdown, the Construction division was expected to decline by 1.7% in 2021-22. Due to the latest restrictions and the risk of further outbreaks, the construction division’s performance is expected to worsen. This follows a 6.5% revenue decline in 2020-21,’ said Mr Aravanis.
Manufacturing
Manufacturing in New South Wales generated $118.4 billion in sales and service income in 2019-20. Several key manufacturing industries will be closed amid restrictions in metropolitan Sydney, while others will move to restricted operations.
‘The long-term risks for manufacturers are high, given the potential for downstream markets to pivot to alternative product suppliers during the lockdown. The recovery of manufacturing in New South Wales is expected to be subdued, relative to other divisions in the state’, said Mr Aravanis.
National impact
The loss of economic activity across most industries in New South Wales is a devastating blow for the Australian economy. The delta strain has once again halted interstate travel, with border restrictions still enforced for most states and territories. The trans-Tasman travel bubble with New Zealand has been closed for eight weeks, extending the economic pain for the Tourism industry. Delta strain COVID-19 cases have also weighed on consumer sentiment and business confidence across Australia, stifling the recovery exhibited in the first half of 2021.
If successful, New South Wales’ struggle against COVID-19 could leave all of Australia with minimal active COVID-19 cases heading into 2022. However, low vaccination rates continue to risk further outbreaks of COVID-19 from returned travellers. Until mass vaccination is achieved, additional lockdowns cannot be ruled out.
‘If New South Wales once again eliminates COVID-19, Australia would be well positioned for an economic recovery. However, state governments will likely be cautious in relaxing restrictions, given the hard lessons learned by both Victoria and New South Wales in failing to contain the virus,’ said Mr Aravanis.
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – Alfabank-Adres Pty Ltd
Tel: 03 9906 3647
