As the Delta variant of COVID-19 sweeps across Australia and impacts the recovery prospects of tourism and other sectors, GlobalData, a leading data and analytics company, has revised down the 2021 GDP growth forecast for Australia from 5.19% in July 2021 to 4.97% in August 2021.

More than half of Australia’s population went under lockdown during July–August 2021 amid stocked fears of rapid spread of highly contagious Delta strain, with tardy vaccine rollout adding to the headwinds. Sydney, Melbourne, Brisbane, Adelaide, Darwin, and Perth have been in the grips of stringent containment measures. As of 17 August 2021, there were a total of 40,774 confirmed cases with 970 deaths.

Jasleen Sandhu, Economic Analyst at GlobalData, comments: “Economic activities in Australia are expected to be affected in the third quarter of 2021 with closure of businesses amid reimposition of lockdown measures. Most restrictions in major cities are projected to be extended until the end of September, with a gradual easing through October. With only 21% of its adult population fully vaccinated, one of the lowest among all OECD nations, there exists a high degree of uncertainty to the economic outlook for the second half of the year.”

Australia’s three biggest and most populated cities – Sydney, Melbourne, and Brisbane – accounted for approximately 40% of Australia’s annual GDP in 2020, meaning the much-anticipated hit to these cities’ business conditions will substantially crunch the national economic figures.

However, the fallout is likely to vary across the nation. Due to the renewed lockdown restrictions, GlobalData has revised down 2021 economic growth forecast for August 2021 compared to the previous month by 2.4 percentage points to 2.4% for Sydney, by 2.0 percentage points to 3.0% for Melbourne and by 3.7 percentage points to 1.4% for Brisbane.

The Purchasing Managers’ Index covering both manufacturing and services, which increased to 60.4 and 58.0, respectively, in May 2021 slipped to 56.9 and 44.2, respectively, in July 2021. Tourism, which accounted for 3.1% of GDP in 2019, was affected the most due to the COVID-19 with the steep decline in total arrivals by 1.54 million in June 2020 and by 1.46 million in June 2021 when compared with pre-pandemic June 2019 arrival statistics.

Some improvement in tourism arrivals was witnessed since the beginning of 2021, which was undone by the renewed travel restrictions under the current ‘zero-Covid’ strategy. Although unemployment rate declined to 4.6% in July 2021 from 5.1% in May 2021, 36.0 million working hours were lost over the same period. The impact of reimposition of lockdown measures on key sectors are expected to deter growth prospects in Q3 2021.

Ms Sandhu concludes: “Several cities across the country have been going through a cycle of stop-start lockdowns after the emergence of the fast-spreading Delta strain. Such measures are expected to continue to dampen the economic recovery prospects until the country reaches a much higher rate of vaccination coverage. Moreover, the federal government must reinstate its JobKeeper and welfare support programs to save jobs and assist businesses and people whose income have fallen due to the prolonged lockdown.”