July 22, 2020 / 7:25 AM / 24 days ago

Australia expects latest virus outbreak to cut third quarter GDP growth by 0.75 pct points: source

FILE PHOTO: Office buildings are seen amidst the easing of the coronavirus disease (COVID-19) restrictions in the Central Business District of Sydney, Australia, June 3, 2020. Picture taken June 3, 2020. REUTERS/Loren Elliott

SYDNEY (Reuters) - The re-introduction of measures to halt the spread of the coronavirus in Australia’s second largest state will shave 0.75 percentage points off the country’s economic output in the third quarter, a government source familiar with official estimates said on Wednesday.

Victoria state earlier this month told nearly 5 million people they would need to stay home for six weeks, permitted to leave only for essential business, as authorities struggle to contain a flare-up of coronavirus cases.

The shutdown has dashed any hope that Australia’s A$2 trillion ($1.4 trillion) economy will rebound quickly. It is facing its deepest economic shock since the Great Depression with the unemployment rate at a 22- year high.

Facing a prolonged economic downturn, Australia said on Tuesday said it would spend A$16.8 billion to extend its wage subsidies for businesses hit by the coronavirus pandemic.

The six-month extension of the programme allays fears of a hard end to the current A$70 billion scheme, but most economists expect a significant economic contraction.

Westpac earlier this month downgraded its forecasts for growth to a 4.2% contraction in 2020 from a 4% fall previously.

Reporting by Colin Packham; Editing by Jacqueline WOng

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