Treasury estimates the mass closure of businesses and activities, designed to stop the spread of the virus, will see Gross Domestic Product plunge by 10 per cent in the June quarter — the equivalent of $50 billion being wiped from the economy.
In a speech to be delivered to the National Press Club on Tuesday, Treasurer Josh Frydenberg will say he is "reassured" by National Cabinet's decision to bring forward its consideration of which COVID-19 restrictions to lift, and when.
"For every extra week the current restrictions remain in place, Treasury estimates that we will see close to a $4 billion reduction in economic activity from a combination of reduced workforce participation, productivity, and consumption," he is expected to say.
Treasury has predicted unemployment will double to 10 per cent in the June quarter — its highest rate in 26 years — meaning an estimated 700,000 Australians are expected to join the jobless as a result of this crisis.
Mr Frydenberg notes in previous recessions, the longer people stayed out of work, the harder it was for them to get a job. "In the early 1990s, unemployment increased by 5 per cent over three years, but took seven years to get back to its pre-crisis level," he will tell the Press Club. "It underlines the importance of getting people back to work as soon as possible to avoid the long-term economic and social impacts from a high unemployment rate."
But this bleak economic outlook was not unique to Australia, with Mr Frydenberg warning "the economic shock the world is confronting dwarfs the global financial crisis". More than 100 countries have gone to the International Monetary Fund seeking assistance, raising fears about the number of possible failed states on the other side.
By closing the borders, quarantining travellers, shutting businesses and socially distancing, Australia has exceeded expectations, flattening the curve quickly and aggressively suppressing the coronavirus.
This success has also prompted questions from some quarters about whether the nation's leaders went too hard and fast with the partial shutdown, given the profound and long-lasting damage it's caused to the economy.
Mr Frydenberg is set to address this criticism on Tuesday, releasing Treasury analysis on the expected cost of a total lockdown. "If these restrictions were increased even further, akin to the eight-week lockdown in Europe, then the adverse impact on GDP could double to 24 per cent, or $120 billion, in the June quarter," he is expected to say.
Ahead of this week's meeting, the states and territories have begun easing restrictions that go above and beyond those set by National Cabinet.
