Australia’s first recession in 30 years confirmed as economy plunges due to virus - NEWS.com.au

The Australian economy has officially entered into a recession with the latest national account figures confirming the worst economic contraction since the Second World War.

Australia’s gross domestic product fell 7 per cent for the June quarter, revealing the financial wounds inflicted upon the economy from the initial lockdown sparked by the coronavirus pandemic.

The drop is higher than what was anticipated by the Reserve Bank of Australia and the upper limit of what economists were forecasting.

Treasurer Josh Frydenberg is expected to front the media in Canberra to confirm the country’s “technical recession.

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Economists were expecting a drop in GDP anywhere between 5 and 7 per cent. The RBA was forecasting GDP will slump by at least 6 per cent.

ANZ is expected GDP to fall 7 per cent compared to the previous quarter, leaving the annualised figure at 6.3 per cent below levels last year.

“At this stage, we expect that the national economy will expand modestly, with the reopening of businesses in other states offsetting a further contraction in activity in Victoria,” ANZ senior economist, Felicity Emmett said.

“The December quarter will prove challenging with a sharp drop off in fiscal stimulus currently scheduled to occur.”

Westpac is also predicted a contraction of around 6 per cent.

In the March quarter, Australia’s gross domestic product had fallen 0.3 per cent, which showcased the initial inflictions caused by the shutdown.

Mr Frydenberg has previously said Australia’s numbers would not be as bad as other countries, telling parliament on Tuesday it indicated the “remarkable resilience of the [Australian] economy.”

Finance Minister Mathias Cormann told the Today show that economies around the world have been hit very hard by the impact of the coronavirus pandemic.

“We are in a much better position than many other countries all around the world,” he said.

“The UK in the June quarter experienced a contraction of 20 per cent in the one quarter.

“Across other … countries it is 10 per cent on average.”

Senator Cormann said Australia had been heading in the right direction in June and early July.

But the outbreak in Victoria did set the nation back and had a “severe negative impact” on the economy in the September quarter.

Opposition treasury spokesman Jim Chalmers on Wednesday said it was going to be “a dark day”.

“This will be the worst quarterly GDP since these records were first kept,” he told ABC Radio National.

“We are in the midst of a deep recession.”

Mr Chalmers again criticised the Morrison Government for not having a jobs plan despite the nation being in a jobs crisis.

He said telling unemployed Australians that the circumstances weren’t as bad as other countries was “meaningless”.

Mr Chalmers called on the government to reconsider the reduction in the JobKeeper rate saying there were some measures the government had done right but “not everything”.

Federal Treasury is understood to be waiting for Victorian premier Daniel Andrews to reveal his road map out of lockdown, before announcing an economic recovery plan.

Reserve Bank of Australia governor Philip in his monthly monetary statement on Tuesday, said Victoria’s stage four lockdowns would have a profound effect on the state’s regional economy.

The RBA is expecting the downturn sparked by the pandemic will cause unemployment to peak at 10 per cent.

The Morrison government has already extended JobKeeper and Jobseeker payment until March next year due to the prolonged slump induced by COVID-19.

Legislation splitting JobKeeper into two tiers and extending the wage subsidy scheme for an additional six months has already passed in parliament.

The $1500 flat fortnightly rate will end later this month. After that, people who worked less than 20 hours a week before the pandemic will be paid $750 a fortnight, and those who were working more than that will receive $1200.

Mr Frydenberg previously noted states and territories need to be more flexible around border arrangements.

But Mr Chalmers has backed Queensland Premier Annastacia Palaszczuk’s decision to keep the borders closed.

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2020-09-02 01:43:47Z
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