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Lockdown scars

Good morning! The number of new COVID-19 cases in New South Wales passed a ton (112) for the first time since 3 April 2020, with at least 34 of those infectious while in the community.

It now seems unlikely that the lockdown will end anytime soon, with Premier Gladys Berejiklian admitting that finishing on Friday was "almost impossible".

In a desperate bid to reduce the human damage from the latest outbreak, the state has been trying to speed up its vaccination rate – the second lowest in the country, only ahead of Western Australia – by making the AstraZeneca vaccine available at its hubs to anyone aged over 40 and bringing forward the date of people's second dose to 6 weeks instead of 12.

Markets

Daily % change

AUD/USD

74.8

+0.7%

10Y Bond

1.33

-3.6%

ASX200

7,334

+1.1%

Brent (bbl)

75.3

-0.4%

Gold (oz)

1,806

-0.2%

Iron ore (t)

208.0

+1.5%

Bitcoin

32,929

-2.9%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

All US indices hit fresh record highs yesterday, with the S&P500 adding 0.35% ahead of a new earnings reporting season and US inflation data tonight. Locally the ASX200 closed 0.83% higher on the back of the big miners, with BHP, Rio Tinto and Fortescue all recording decent gains.

Enter Goliath: According to the AFR citing Jefferies' banking analyst Brian Johnson, Commonwealth Bank of Australia's entry into the buy now, pay later space "could be comparable to Aussie Home Loans entry into the mortgage market in the 1990s, which prefaced a dramatic and permanent drop in mortgage margins for incumbent lenders".


Feature

Lockdown scars

Lockdowns take a toll on activity, and could cause long-term scarring.
Lockdowns take a toll on activity, and could cause long-term scarring. AFR/AMP

Greater Sydney's lockdown looks set to continue beyond this week, with the economic damage alone likely to run as high as $A7 billion, according to AMP Capital.

Why this matters: Sydney is Australia's largest city, with the current lockdown certain to drag down growth in the September quarter. An extended Sydney lockdown also poses a threat to the nation's finances, with the recent big spending Commonwealth budget underpinned by the assumption that it would create 250,000 jobs – many in Sydney – and drive unemployment below 5% by the end of next year. It may also affect the thinking of the central bank, which wants to "achieve low unemployment and a rate of inflation that is sustainably in the 2 to 3 per cent target range".

Looking forward: The longer a city stays in lockdown, the more likely that economic 'scarring' occurs, where there are medium- to long-term consequences such as higher unemployment and lower wages as resources are reallocated. A recent study by Deloitte Access Economics predicted that Melbourne's central business district – which was effectively shut down for 112 days last year – will not return to pre-pandemic levels of activity until late 2024 or early 2025. Victoria also had the lowest increase in population of any state or territory in 2020, with people seeking out opportunities in freer cities.

It's not yet clear what Sydney's fate will be, but the opportunities lost during this lockdown will inevitably act as a drag on the city's future growth.


The Wrap Up

  • 🚖 DiDi is offering free rides (2x $10 vouchers) to "help Australians travel safely and reliably to vaccination appointments".
  • 🥐 France's minister for European affairs Clement Beaune said that the country "must live with the virus... because we have the vaccine".
  • 🌍 The European Commission will delay its plans for a controversial digital tax "to support the historic G20 deal [for a 15% minimum corporate tax rate]".
  • ⚽ Italy defeated England on penalties in the final of the Euro 2020 competition.
  • 🍄 An unopened copy of Nintendo's 1996 Super Mario 64 sold at auction for $US1.56 million.
  • 🕵️‍♂️ No, former Prime Minister Kevin Rudd didn't help Australia secure earlier access to the Pfizer vaccine.
  • ⚔️ All Australian Defence Force personnel have departed Afghanistan, bringing the nation's longest war (20 years) to a close.
  • 💉 Pfizer is seeking US FDA approval for a third COVID-19 vaccine dose in August, after it released evidence showing another dose six months after the second boosts immunity against variants.
  • 🚀 Virgin Galactic founder and "very concerned environmentalist" Richard Branson successfully travelled to space for a few minutes.
  • 🏭 A group of billionaires, including Mark Zuckerberg, Jeff Bezos and Bill Gates, this week flew more than 90 private jets into Idaho for the annual Sun Valley Conference to discuss climate change.

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