The Morrison government has been hit by the double whammy of worsening voter support for its difficult vaccine rollout at a time of rapidly deteriorating economic prospects.

The drop in the unemployment rate to 4.9% in June, its lowest in a decade, could prove to be the last good news so far as the economy sinks under the weight of COVID lockdowns. 19 in its two largest cities.

Economists believe the first contraction of the national economy from the depths of the pandemic is increasingly likely after the NSW government further tightened lockdown restrictions over the weekend.

Monday was the first day that all non-essential retail businesses were closed in Greater Sydney, coupled with the construction industry shutdown until July 30, the first time the latter measure has been imposed in NSW .

Adding to the economic gloom, Victoria’s lockdown is expected to extend beyond the five days originally scheduled, but at this point it’s unclear by how much.

“We now have almost two-thirds of the national economy stranded… this is going to really hurt,” Australian Industry Group chief executive Innes Willox told Sky News on Monday.

“Lockdowns and border closures are the real drag on the economy.”

Economists at JP Morgan estimate that Greater Sydney accounts for 70% of construction in New South Wales and on its own will reduce economic growth by 0.5 percentage points for every month the restrictions are in place.

But NSW Premier Gladys Berejiklian defended the decision on construction sites on Monday.

“To have the risk that thousands and thousands of people were mobile at the same time, many of them from communities that have had cases, was too big a risk,” she told reporters.

Meanwhile, Victorian Prime Minister Daniel Andrews said great strides had been made to contain the virus in his state and that the lockdown had been the right course of action.

“But we will not be ready to lift this lockdown at midnight tomorrow night,” he told reporters.

ANZ economists say it is now increasingly likely that the national accounts for the September quarter will show a shrinking economy.

It would be the first negative result since Australia plunged into its first recession in nearly three decades last June.

RBC Capital Markets chief economist Su-Lin Ong estimates that the shutdown of construction in Greater Sydney over the next two weeks will put an additional $ 1 billion on the economy.

Economists have estimated that the twin closures of Sydney and Melbourne could cost the national economy between $ 7 billion and $ 10 billion.

Ms Ong said that even assuming some sort of recovery in the later stages of the September quarter, she predicted growth would be 1.5% weaker than previously thought, resulting in an overall contraction of 0.6. %.

Adding to the government’s woes, the latest Newspoll showed that the Federal Labor Party now leads the coalition from 53% to 47% on a base preferred by the two parties, up from 51-49 at the end of June.

A federal election is scheduled for the next year.