If not now when Frydenberg warns states to stick to the road map amid recession fears

Treasurer Josh Frydenberg has warned state premiers the economy will suffer if they don’t stick to the national plan to reopen once adult vaccination rates reach 70 and 80 per cent.

In a coded message to the resources states of Queensland and Western Australia - both of which have doggedly pursued zero-COVID policies, kept their borders closed and are lagging the rest of the country in vaccination rates - Mr Frydenberg also warned of a “ridiculous” scenario under which it might be possible for many Australians to fly to Singapore or Canada, but not Perth or Cairns.

Treasurer Josh Frydenberg during a press conference at Parliament House in Canberra.Credit:Alex Ellinghausen

Amid ongoing lockdowns in NSW, Victoria and the ACT, Mr Frydenberg said economic growth would be “almost certainly negative in the September quarter, with a contraction of at least 2 per cent, [but] I am hopeful and confident the economy can come back in the December quarter if, as expected, restrictions ease”.

Economists are divided as to whether Wednesday’s national accounts figures will show the economy shrank in the June quarter. Two consecutive quarters of negative growth will signify the country is once again in a technical recession.

AMP chief Economist Shane Oliver has forecast negative growth of 0.1 per cent for the June quarter, while Commonwealth Bank head of Australian economics Gareth Aird has forecast modest growth of 0.4 per cent.

“Whatever the final number is on Wednesday, it does not change the fact that our economy faces some difficult days ahead,” Mr Frydenberg said. “This is another reason why we must stick to our plan and open up at 70 and 80 per cent. If not now, when?”

He warned that if premiers and chief ministers did not stick to the plan to reopen, then the hit to the economy and jobs would be high, with businesses closing and debt increasing.

“Learning to live with the virus is our only hope. To delay and deny that fact is not only wrong but incredibly unrealistic,” Mr Frydenberg said.

“It’s in no one’s interests for states to be on different tracks when it comes to opening up. It would be ridiculous in the extreme to be able to travel to Canada but not Cairns, or Singapore but not Perth.

“The world is opening up, Australia will open up ... Opening up as one country and in accordance with the plan will not only give people hope but provide a springboard for our economic recovery.”

But in the clearest signal yet that Western Australia was prepared to walk away from the road map, Premier Mark McGowan said on Saturday his state needed higher vaccination levels to reopen and flagged waiting “a few more months” to reach them.

Last week The Sun-Herald and The Sunday Age revealed that updated Doherty Institute modelling showed NSW would still be able to begin opening up once the vaccination targets were met - even if there were hundreds of new daily cases in the community, rather than the 30 on which the original modelling was based.

That prompted some states, including Western Australia and Queensland, to express concern about opening up and allowing COVID into the community.

Mr McGowan said on Saturday that Western Australia wanted to remain COVID-free “for as long as we can”.

“Our vaccination levels at 70 per cent, for instance, still means that 30 per cent of the adult population are unvaccinated, and then, when you add kids on, that’s about another 20 per cent,” he said.

“So were we to deliberately import the virus at that point in time, hundreds of people would die, it would result in huge economic dislocation and for what? If we wait a few more months, we get our vaccination levels up to a higher level, we can avoid all of that.”

Each week of lockdown in NSW and Victoria costs the economy an estimated $2 billion, while the federal government is spending hundreds of millions more on financial support every week. Mr Frydenberg has previously said the federal government could withdraw that support from states which refuse to open up.

Mr Oliver said that “in a purely economic sense, a recession doesn’t mean much”, but it could impact confidence, which in turn impacts the speed of the recovery.

“The ‘recession’ concept is less meaningful than usual as it’s not a normal cyclical recession and the economy should recover more quickly than would occur after a normal recession, as reopening will unleash pent-up demand - even if this is a bit constrained compared to last year as we have to learn to “live with COVID”.

Mr Aird said that regardless of whether Australia officially went into recession or not, “a huge number of people are stood down, the economy is going through a huge shock”.

War of words: Daniel Andrews and Josh Frydenberg sparred over financial assistance.Credit:

“Try telling someone in Victoria or NSW we aren’t in recession ... however, we are almost certain to rebound in quarter four as things open up.”

Mr Frydenberg, who is from Melbourne and was last year a vocal critic of Victorian Premier Daniel Andrews’ extended second wave lockdown, defended himself from public criticism that he had not spoken out against NSW Premier Gladys Berejiklian’s lockdown this year in the same way.

“My concern has always been first and foremost for the Victorian people, that is why I spoke up vigorously in their defence last year and that is why from day one of this pandemic I have ensured Victoria has received an unprecedented amount of economic support,” he said.

“I have a good working relationship with my Victorian counterpart Tim Pallas and in the latest Victorians lockdown alone we have joined together to provide more than $2 billion in economic support.”

Relations between the federal Liberal government and the state Labor government have eased somewhat since then, with Mr Andrews and Mr Pallas and other senior state ministers have noting a shift.

Mr Andrews recently noted that “the federal Treasurer has taken a different tone and a different approach this year and I think Victorians are grateful for that”.

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James Massola is political correspondent for the Sun-Herald & Sunday Age. He won the Kennedy award for Outstanding Foreign Correspondent while posted in Jakarta and wrote The Great Cave Rescue. He was previously chief political correspondent.

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