Australia's central bank reviews economic outlook in light of virus

SYDNEY - The Reserve Bank of Australia (RBA) revised its outlook for the national economy on Friday, following a widespread COVID-19 outbreak and subsequent lockdown across the State of Victoria.

In a quarterly monetary statement, RBA estimates put the cost of Victoria's second wave at 2 percent of the national real GDP over the September quarter, relative to modeling where the second outbreak had not occurred.

On Friday, Victoria recorded 450 new infections and 11 deaths amid concerns that some people were continuing to break social distancing regulations.

In a speech delivered shortly after the release, RBA Assistant Governor (Economic) Luci Ellis described the pandemic as "a shock without modern precedent."

"The situation in Victoria will reduce growth in the September quarter and push out the recovery beyond that," Ellis said, adding that activity is expected to continue to recover in much of the country over the rest of this year and next.

Compared with the RBA's previous quarterly outlook, the initial impact of COVID-19 was only slightly smaller than three months ago, with forecasts predicting a 6 percent contraction in the national economy for 2020.

However, the longer term recovery was predicted as weaker than the May forecast, revised down from a 6 percent to 5 percent rebound.

Despite costing the national economy an estimated 10 billion Australian dollars (about $7.2 billion), Ellis said that she was in favor of Stage 3 and 4 restrictions being introduced in Victoria to get a handle on the virus which would be vital to a strong recovery.

"What we have seen around the world are economies that haven't had a good handle on the virus but have not restricted activity haven't really had any better economic performance than those that did a very quick lockdown," Ellis said.