Australia could lose up to A$1b each week with reimposed lockdown in Victoria

Sydney

AUSTRALIA could take an economic hit of as much as A$1 billion (S$971 million) each week because of Covid-19 restrictions reimposed by Victoria state, Treasurer Josh Frydenberg said on Wednesday.

Renewed lockdown measures in Victoria's capital city of Melbourne kicked in from midnight on Wednesday for at least six weeks, closing down cafes, bars, restaurants, hairdressers and gyms, and confining around 4.9 million people to their homes except for essential business.

The state also closed its busy border with New South Wales, cutting off movement between the country's two most populous and economically significant states.

"The cost to Victoria is up to A$1 billion a week, and that will fall heavily on businesses," Mr Frydenberg told the Australian Broadcasting Corporation. He said the estimate was based on Victoria accounting for around a quarter of the national economy.

The restrictions come after a surge in Covid-19 infections in Melbourne that has sparked fears of a broader second wave.

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The authorities hastily set up a system to issue travel permits to people who cross the highly porous border daily as hundreds of police officers and army troops were deployed to monitor its closure. Among people they said would be granted a pass were those living in border towns who commute regularly for work and school. But the website created to issue passes crashed soon after its launch on Tuesday evening with officials saying more than 44,000 people applied. People could still travel with documentation that showed their eligibility for a pass, officials said.

People caught crossing the border without permission face penalties including a fine of A$11,000 and six months imprisonment.

The lockdown across metropolitan Melbourne is also likely to affect sales and profits for some of Australia's biggest firms analysts say.

"Since March, the majority of Victorians will have spent more time in lockdown than not when restrictions next ease in August," Morgan Stanley analysts wrote. "The consumer response will be important to watch."

Sydney Airport and Transurban Group are among the stocks most affected, according to RBC Capital Markets. Along with the closure of the shared border between New South Wales and Victoria, the curbs will delay a revival of domestic travel for the airport, the analysts wrote.

For toll operator Transurban, the stay-at-home measures could result in a 25-30 per cent decline in Melbourne traffic during this half of the year from the same period in 2019.

Victoria's daily Covid-19 infection count reached a new state record of 191 on Tuesday, taking the national tally to 8,755 cases with 106 deaths, the latter putting it on par with Maine, one of the least-affected US states.

The lockdown could also hamper an earnings recovery for private hospital operator Ramsay Health Care Ltd, JP Morgan analysts said. The rise in virus cases has already prompted Melburnians to cancel surgeries, making it unclear whether the company's Victoria operations could rebound this quarter. The state government is also likely to announce limits for elective surgeries in the coming days, the analysts added.

Credit Suisse Group AG downgraded Coca-Cola Amatil to neutral amid uncertainty around operating performance. The broker said the short-term impact of the Victoria lockdown was "concerning" given that half of the company's sales come from shops that aren't grocery stores, and the state represents about a fifth of national beverage consumption. REUTERS, BLOOMBERG