Published on : Wednesday, July 8, 2020
Melbourne, the second-largest city in Australia is facing a renewed Covid-19
outbreak and is marring the reputation of the country as a standout in containing the virus. Also, it risks additional damaging of regional economy that depends a lot on foreign tourists, students as well as migrants.
After recording 127 cases overnight, Melbourne, the capital of Victoria State with about a population of 5 million, has locked down 12 areas. Victorian authorities over the weekend took the toughest measures, taken till date, restraining 3,000 residents of nine public-housing towers from leaving their apartments.
Like other states in Australia, Victoria doesn’t have those natural resources,
leaving it heavily dependent on population growth, international students and tourists, said Alex Joiner, chief economist at IFM Investors in Melbourne.
“Those drivers of growth aren’t coming back anytime soon,” Joiner said. “As it becomes more obvious that Victoria is suffering a different type of crisis to the other states that would deter domestic tourism as well.”
Once well-known as the manufacturing powerhouse of the country, Victoria has turned to international services as the economy of Australia de-industrialized. The University of Melbourne and Monash University are the two of its largest exporters by value. Also, they are important tourist attractions, hosting international sporting events like the Australian Open tennis championship, the Formula 1 Grand Prix and Melbourne Cup horse race.
The state continues to be a major an economic player: In 2018-19 Victoria
contributed 23.7% of the gross domestic product of Australia, or just under A$400 billion ($279 billion), and second only to New South Wales’ 32.6%. Its main significance suggests the federal government, in its July 23 economic statement, may have to provide added support to Victoria even if it winds back stimulus to other areas.
To quote the economists of Bloomberg, “Over the past 5 years Australia’s
economic momentum has swung to the southeastern states as the mining
investment boom ebbed. Victoria has been an epicenter of that growth
momentum. Surging population growth drove a housing construction boom, alongside a services sector surge that outweighed the drag from the shutdown of Australia’s vehicle manufacturers. While the escalating outbreak in Victoria will temporarily remove a key region from Australia’s post-shutdown recovery, there are emerging signs that Australia’s agriculture and mining sectors could offer important offsets for Australia’s macro — but not necessarily labor market — outlook over 2H 2020 and beyond.”
Even prior to the renewed COVID breakout, Victoria showed slackness in bringing the virus under control. That showed in the slow hiring recovery of the state, with employment drop a net 7.6% from pre-pandemic levels, the worst of any state and lower than the 6.4% average drop for the country as a whole.
“All of the mobility data, the Google and Apple stuff, shows that Victoria is lagging the rest of the country in emerging from the lockdown, and is about to overtake Tasmania as the state which has had the highest number of cases per head of population,” said Saul Eslake, an independent economist.