Melbourne second wave signals setback to tourism, education hub

  • Economy
  • Monday, 06 Jul 2020

One at a time: Medical workers manning a drive-through Covid-19 testing site set up at a shopping centre carpark in Melbourne. — AFP

A RENEWED Covid-19 outbreak in Australia’s second-largest city is marring the country’s reputation as a standout in suppressing the virus, and risks further damaging a regional economy that relies heavily on international tourists, students and migrants.

Melbourne, the capital of Victoria state, has locked down 12 areas after recording 127 cases overnight, its biggest daily increase. Over the weekend authorities in Victoria took the toughest control measures to date in Australia, barring 3,000 residents of nine public-housing towers from leaving their apartments.

Victoria doesn’t have the natural resources that other Australian states have, leaving its economy heavily reliant 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 known as the nation’s manufacturing powerhouse, Victoria has pivoted to international services as Australia’s economy de-industrialized. Its two largest exporters by value are the University of Melbourne and Monash University. It’s also a major tourist draw, hosting international sporting events like the Australian Open tennis championship, the Formula 1 Grand Prix and Melbourne Cup horse race.

The state remains a significant economic player: In 2018-19 Victoria contributed 23.7% of Australia’s gross domestic product, second only to New South Wales’ 32.6%. Its importance suggests the federal government, in its July 23 economic statement, may have to direct more support to Victoria even if it winds back stimulus to other areas.

Virus laggard Even before the renewed breakout, Victoria was a laggard in bringing the virus under control. That shows in the state’s slow hiring recovery, with employment down a net 7.6% from pre-pandemic levels, the worst of any state and lower than the 6.4% average decline 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 who has observed Australia’s economy for four decades.

There are reports of renewed panic buying in Melbourne, reminiscent of the frenzy in Australia’s other major cities in March to stock up on toilet paper as the national lockdown began.

Victoria’s renewed caseload could take a toll on the national economy. The outbreak is expected to postpone any plans for Australia to reactivate international travel with other countries that have contained Covid-19, such as New Zealand and Thailand, said Yin Yeoh, a senior industry analyst at IBISWorld. Tourism and hospitality industries such as restaurants and cafes are expected to continue to struggle this year and next, Yeoh said.

"While Victoria has been the first Australian region to experience a second wave of Covid-19, it is unlikely to be the last,” she said. "Local outbreaks and lockdowns are likely to be the new normal for some time.” - Bloomberg

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Melbourne , Victoria , tourism , Covid-19 , lockdown


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