Invest
GDP falls by 0.3 per cent in March quarter
Australia’s gross domestic product fell by 0.3 per cent seasonally adjusted for the March quarter, putting the country on track for a recession, official figures have shown.
GDP falls by 0.3 per cent in March quarter
Australia’s gross domestic product fell by 0.3 per cent seasonally adjusted for the March quarter, putting the country on track for a recession, official figures have shown.
A technical recession is defined by two periods of negative economic growth, with federal Treasurer Josh Frydenberg telling the media that the bushfires and COVID-19 have ended Australia’s 29 years of uninterrupted economic prosperity.
Commenting on the figures, ABS chief economist Bruce Hockman said: “This was the slowest through-the-year growth since September 2009 when Australia was in the midst of the global financial crisis and captures just the beginning of the expected economic effects of COVID-19.”
The Australian economy was impacted by a number of significant events this quarter, starting with bushfires and other natural disasters, followed by the outbreak of COVID-19 and the subsequent imposition of restrictions.
The government responded with the introduction of economic stimulus and support packages.
“Government spending at all levels increased in response to the bushfires and the management of the COVID-19 pandemic.”
Private demand detracted 0.8 percentage points from GDP, driven primarily by a 1.1 per cent fall in household final consumption expenditure.
Spending on services fell significantly, particularly where restrictions impacted most severely, such as air transport services, hotels, cafes and restaurants, recreation and culture.
Spending on goods rose, most notably in food and pharmaceuticals, as Australians panic bought goods, including toilet paper and pasta.
Net trade contributed 0.5 percentage points to GDP. Imports of goods fell 3.9 per cent, with falls in consumption and capital goods reflecting weak domestic demand.
Imports of services fell 13.6 per cent, with travel services falling sharply in response to the global outbreak of COVID-19 and associated travel bans.
Exports of services declined 12.8 per cent, with restrictions on overseas arrivals reducing education-related travel and tourism in Australia.
BetaShare’s chief economist, David Bassanese, highlighted the positive that recessions are defined by contraction of economic growth, so it is likely the recession has already ended.
“The government-imposed shutdowns likely caused the sharpest and shortest economic contraction in history, spanning just the months of March and April,” he said.
“That said, to the extent recession is defined as a period of subpar economic growth and persistent very high unemployment, then challenging times will likely persist for at least another six months to one year,” Mr Bassanese noted.
However, the economist is not predicting life to immediately return to normal, with the economy slowly growing in the near term.
“While we may see a short-term bounce in economic activity from depression conditions as social distancing restrictions ease, the ongoing risk of second waves likely mean global business and consumer spending settle back to a quite subdued pace over the following months thereafter,” Mr Bassanese explained.
He also believes that monetary policy is unlikely to be used to help kickstart the economy, as the Reserve Bank of Australia has already fired all its bullets.
“While the RBA may still be tempted to flirt with negative interest rates if the Australian dollar strengthens further, it’s perhaps better off pleading with other central banks not to pursue this zero sum game of competitive currency depreciation. It’s not helpful to the banking sector and risks further inflating a dangerous bubble in equity market valuations,” Mr Bassanese said.
Finally, the economist explained that even though Australia is likely to fall into a recession, as a nation Australia is performing better than many G20 countries.
“Australia is very well placed to handle further virus outbreaks, but the same can’t be said for other major economies such as the United States. Sadly, therefore, we won’t be immune to the risk of poorer policy responses elsewhere,” Mr Bassanese concluded.
About the author
About the author
Economy
Recession fears loom as Australia battles new COVID outbreaks
The Australian economy is expected to shrink over the September quarter, with lockdowns reversing economic gains over the last six months, top economists have revealed. ...Read more
Economy
Lockdowns take toll on retail trade
Lockdowns hurt retailers in June, but the big picture trends around consumer spending tell a different story. ...Read more
Economy
Consumer confidence plunges on prolonged lockdowns
Prolonged lockdowns in Sydney and Melbourne have seen consumer confidence plummet to November 2020 lows, putting more pressure on the economic recovery, a new survey has revealed. ...Read more
Economy
Industry leaders call for lockdowns guided by more than just health advice
Amid the standing down of the construction industry in NSW, the head of the Ai Group has called for an overhaul of how the government thinks and talks about lockdowns. ...Read more
Economy
Does Sydney need a calm and common-sense approach to lockdowns?
Following a spate of changes across greater Sydney, the business community is calling for a more sensible approach to lockdown restrictions. ...Read more
Economy
Federal government moves to implement ‘compensation scheme of last resort’
The government is now taking stakeholder feedback on two recommendations made by the financial services royal commission. ...Read more
Economy
‘No policy case’ for digital currency, RBA says
Even if Australia’s central bank isn’t looking to issue a digital currency anytime soon, it’s playing an active role in the surrounding conversation. ...Read more
Economy
Sydney counts cost of lockdowns
The extension of Sydney’s lockdown is now estimated to cost the Australian economy up to $7 billion, but consumer spending and government support are set to limit the damage done to the nation’s G...Read more
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Are property prices set to crash? Should you jump on board the fintok craze? And how to prepare for this tax time
Listen now
Economy
Recession fears loom as Australia battles new COVID outbreaks
The Australian economy is expected to shrink over the September quarter, with lockdowns reversing economic gains over the last six months, top economists have revealed. ...Read more
Economy
Lockdowns take toll on retail trade
Lockdowns hurt retailers in June, but the big picture trends around consumer spending tell a different story. ...Read more
Economy
Consumer confidence plunges on prolonged lockdowns
Prolonged lockdowns in Sydney and Melbourne have seen consumer confidence plummet to November 2020 lows, putting more pressure on the economic recovery, a new survey has revealed. ...Read more
Economy
Industry leaders call for lockdowns guided by more than just health advice
Amid the standing down of the construction industry in NSW, the head of the Ai Group has called for an overhaul of how the government thinks and talks about lockdowns. ...Read more
Economy
Does Sydney need a calm and common-sense approach to lockdowns?
Following a spate of changes across greater Sydney, the business community is calling for a more sensible approach to lockdown restrictions. ...Read more
Economy
Federal government moves to implement ‘compensation scheme of last resort’
The government is now taking stakeholder feedback on two recommendations made by the financial services royal commission. ...Read more
Economy
‘No policy case’ for digital currency, RBA says
Even if Australia’s central bank isn’t looking to issue a digital currency anytime soon, it’s playing an active role in the surrounding conversation. ...Read more
Economy
Sydney counts cost of lockdowns
The extension of Sydney’s lockdown is now estimated to cost the Australian economy up to $7 billion, but consumer spending and government support are set to limit the damage done to the nation’s G...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
