• The Greater Sydney lockdown could erase GDP gains projected for the September quarter, economists warn.
• Australia has staged a remarkable economic recovery from the shutdowns of 2020, and the RBA in May projected GDP growth of 4.75% over 2021.
• But the Greater Sydney lockdown is estimated to cost as much as $1 billion in lost economic activity each week, with no clear end date in sight.
• Visit Business Insider Australia’s homepage for more stories.

An extended Sydney lockdown could threaten Australia’s broader economic recovery, according to economists who fear two months of closed businesses and shuttered state borders could batter the GDP gains projected for the September quarter.

Greater Sydney is on high alert after New South Wales recorded 112 new cases of COVID-19 in the community on Monday, all but assuring the region’s three-week lockdown, which is slated to end this Friday, will face an extension.

Beyond the immediate implications for vulnerable workers and communities, the lockdown also threatens to derail Australia’s remarkable economic rebound from the deep lockdowns of 2020.

Australia’s GDP over the March quarter grew by 1.8%, and in May, the Reserve Bank of Australia projected GDP to rise 4.75% over 2021.

But estimates from the state government and the private sector state between $850 million and $1 billion in economic activity is lost for each week of Greater Sydney’s lockdown.

Citing Commonwealth Bank’s head of Australian economics Gareth Aird, the Australian reports an eight-week lockdown could evaporate $7.5 billion of economic activity — which could erase the GDP gains tentatively predicted in the coming months.

The impacts would not just be felt in NSW, according to HSBC economist Paul Bloxham, who warned the Australian Financial Review of “quite large cascading effects across the country” due to border closures.

The Sydney lockdown differs from 2020’s lengthy business closures due to the transmissibility of the COVID-19 Delta variant, which is thought to be much higher than previous strains, and the lack of a federal payroll subsidy, like the $90 billion JobKeeper payment which covered most of 2020 and the early months of 2021.

Some economic supports exist for locked-down Sydneysiders in the form of federal COVID-19 disaster payments and state government small business grants, but those measures fall far short of the safety nets offered to workers through 2020.

There is some reason to believe in a rapid rebound once the lockdown is lifted. Speaking in June after Victoria’s recent snap lockdown, Reserve Bank of Australia assistant governor Luci Ellis said “Timely data on spending suggest that the snap-back after the shorter lockdowns imposed in parts of Australia this year has been almost immediate.”

Nevertheless, Aird told the Australian that further government supports would be “critical” to offer further support to businesses and households through what is poised to be Australia’s most severe lockdown since Melbourne’s long slog in 2020.

Speaking in Sydney on Monday, Premier Gladys Berejiklian confirmed the state government will announce further support measures in the coming days, with further developments likely as early as Tuesday.

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