Lockdowns in NSW and Victoria will likely cause the Australian economy to contract as businesses and workers reel from the impact of restrictions. For now, the country narrowly missed another recession and showed signs of marginal growth.

The economy grew 0.7% in the June quarter, according to the Australian Bureau of Statistics, beating expectations of weaker GDP growth. 

The number, however, still indicates a slowdown compared to performance in the first quarter of 2021, when the economy rose 1.9%. This downward trend is believed to have started months before the COVID-19 Delta variant sparked a new wave of lockdowns across states.

Analysts predict that the recent growth may be short-lived as pandemic measures once again take a toll on the economy. “It is likely that the national economy will contract by around 3% in the September quarter as a result,” said Dr. Sarah Hunter, chief economist for BIS Oxford Economics, as quoted in ABC News.

Is Australia’s growth short lived?

Things may get worse before they get better -- even as Australia stays on track with its vaccination drive. Immunisation, Dr. Hunter said, could indeed enable some states to reopen in the December quarter and thus kick off another recovery phase. 

But the rebound could be a lengthy and arduous process, dragging on to 2022. “The shift to a new COVID-normal, where there are persistent cases within the community, will make some people cautious,” Dr. Hunter said.

Australia could simply be in the “eye of the storm,” according to analysis from Deloitte Access Economics. 

“The data reflects a bumper period for Australia. But the same can’t be said for today,” said Stephen Smith, a partner at the firm. “The June quarter was the eye of the storm, with just 7% of the population locked down on any given day across the period.” 

Today, about 45% of Australians are sheltering at home. “We’re seeing the impacts of that flow through to businesses and jobs,” Smith said in this report.“ As things currently stand, that suggests we could see the economy shrink in the September quarter by more than 4%,” he said.

Last month, Treasurer Josh Frydenberg praised Australia for bouncing back, on account of its falling unemployment rate. He now echoes the same sentiment with regard to GDP growth. “Today’s national account numbers underline the fact that our economy remains resilient, that its fundamentals remain sound, that our economy remains strong, and that we are in a position to bounce back strongly as an economy,” Frydenberg said.

His optimism, however, comes with the urgency of vaccinating the population, particularly workers, and reopening businesses. 

“If we don’t stick to the national plan, jobs will be lost,” the treasurer said. “If we don’t stick to the national plan, our debt burden will increase. “We need to vaccinate people but we need to open up safely in accordance with that plan at 70% to 80%.”

In the past, Australia has proven that it is able to bounce back from the economic fallout of the pandemic. But how quickly it will recover this time will depend largely on the extent of government support – both for businesses and workers still waiting for their turn at the vaccination line.