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Worst is yet to come: $50bn hit still expected
Australia’s economic indicators will get considerably worse before they get better as the financial shock the world is now confronting dwarfs the GFC, the federal Treasurer has conceded.
Worst is yet to come: $50bn hit still expected
Australia’s economic indicators will get considerably worse before they get better as the financial shock the world is now confronting dwarfs the GFC, the federal Treasurer has conceded.
In an address to the National Press Club yesterday, Josh Frydenberg said even with the unprecedented scale and scope of the country’s economic response, “the economic shock will be broad”.
“Notwithstanding Australia’s progress to date on the health front, and the unprecedented scale and scope of our economic response, our economic indicators are going to get considerably worse in the period ahead before they get better,” he stated.
Most notably, GDP is expected to fall significantly, with the Treasury forecasting a hit of more than 10 per cent in the June quarter alone — the equivalent of $50 billion.
Mr Frydenberg reiterated the expectation that the unemployment rate in Australia will reach 10 per cent in the same quarter.
It’s a grim picture on a consumer level, too, with some of the “hardest hit sectors like retail and hospitality among the biggest employers, accounting for more than 2 million employees between them”.
The Treasurer cited NAB data to reveal overall consumption nationwide has fallen by 19.5 per cent, on average, across all Australian jurisdictions.
Moving from a reflection on the past six weeks to what Australians can expect going forward, Mr Frydenberg flagged the balancing act that will be required when reducing restrictions on both business activities and consumers alike.
“Going forward, we need to ensure when sectors are open — for example, in retail — that there is both consumer confidence to engage in these activities, but also business confidence that they are unlikely to be disrupted again and forced to close,” he explained.
While flagging that “we must get people back into jobs and back into work”, the Treasurer said that there needs to be strong confidence that in enabling more business activity to take place, there’s confidence that Australia “can effectively manage any health risks that arise”.
According to the Treasury, for every extra week that current restrictions remain in place, there’s a reduction in economic activity of almost $4 billion.
This figure considers a combination of reduced workforce participation, productivity and consumption and is equivalent to what approximately 4 million Australians on the median wage would earn in one week.
Mr Frydenberg went on to highlight that many other countries “are facing considerably more challenging circumstances”.
“During the GFC, the global economy contracted by just 0.1 [of a percentage point] in 2009, but according to the IMF’s most recent forecast, there will be a 3 per cent contraction in global growth in 2020,” he stated.
With more than $US8 trillion already committed globally in economic support, the Treasurer highlighted how more than 100 countries have already sought assistance from the IMF.
Over in the United States, 30 million Americans have filed jobless claims in the last four weeks alone — equivalent to almost one-fifth of the nation’s labour force.
Record GDP falls have been seen in Italy, France and Spain, while China has seen its first quarterly GDP drop on record, having dipped almost 10 per cent in the March quarter alone.
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