State economies and the stringency of COVID-19 containment measures

Released
2/12/2020

In response to increasing numbers of COVID-19 cases in Melbourne, the Victorian state government implemented progressively stricter containment measures, peaking with stage 4 restrictions from 2nd August to 13th September. Meanwhile, other states relaxed restrictions significantly.

Expanding on the analysis published in the March and June quarters, the ABS has applied the methodology developed for the Oxford COVID-19 Government Response Tracker to each of Australia’s eight states and territories; using archived official sources to rank the severity of restrictions on movement and the government response. Eight indices have been produced measuring the stringency of a state government’s response to COVID-19 (Figure 1), with a score of 100 indicating a maximum level of restrictions.

Figure 1: Stringency of state and territory governments' responses to COVID-19

The state level index excludes the impact of federal policies such as international border closures and the federal public health campaign.

The stringency of the government response in each jurisdiction clearly had an impact on economic activity. State final demand, a measure of consumption and capital expenditure, was the best available indicator of quarterly economic activity for each state or territory. Figure 2 compares growth in state final demand from the December quarter 2019 (before restrictions were first implemented) to the September quarter 2020. Social distancing requirements and changes in consumer behaviour had an adverse impact on the consumption of goods and services.

Figure 2: Stringency of government response and growth in final demand, by state and territory, from December 2019 to September 2020

State final demand measured in seasonally adjusted volume measures; growth in September quarter 2020 since December quarter 2019. Stringency index excludes the impact of federal policies such as international border closures and the federal public health campaign.

Household spending makes up the largest share of final demand in each state, and the impact of restrictions on movement were more evident here (Figure 3).

Figure 3: Stringency of government response and growth in household spending, by state and territory, from December 2019 to September 2020

Household consumption measured in seasonally adjusted volume measures; growth in September quarter 2020 since December quarter 2019. Stringency index excludes the impact of federal policies such as international border closures and the federal public health campaign.

Since the December quarter, spending on services was limited across all states and territories by physical distancing requirements (Figure 4). This was especially evident in Victoria during the September quarter, due to stay-at-home orders, closures of non-essential services, the cancellation of public events, and restrictions on gatherings.

Figure 4: Growth in households’ consumption of goods and services, by state and territory, from December 2019 to September 2020

Household final consumption expenditure measured in seasonally adjusted volume measures, growth in September quarter 2020 since December quarter 2019. HFCE COICOPS containing a mix of goods and services were allocated based on their predominant activity. These were determined using detailed COICOP data in original chain volume measures (available Australian National Accounts: National Income, Expenditure and Product).

For more analysis of household consumption and the differences in state’s experiences over the September quarter, see the spotlight Insights into household consumption.