ANZ: Lockdowns To Drive Australia's Q3 GDP Contraction

ANZ note that "Sydney's lockdown looks likely to be deeper and longer than we initially estimated, and we now anticipate tight restrictions to continue until at least the end of September. There have also been lockdowns in Victorian and South Australia. As a result, we expect GDP to fall 1.3% q/q in Q3, compared with our previous estimate of +0.4%. Further government support seems likely, and this will underpin a rebound in activity once restrictions lift. The RBA is also expected to pitch in by delaying the reduction in weekly bond purchases announced at its July Board meeting until at least November. Labour hoarding and fiscal support will mitigate the effects on employment and the unemployment rate; hours worked and underemployment will bear the brunt of the lockdown. We expect the unemployment rate to fall to 4.5% in Q4, only marginally above our previous forecast. The risks to the outlook are tilted to the downside. Given the much greater transmissibility of the Delta variant, the possibility of a longer lockdown in Sydney or further contagion into other states is significant."