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Katina Curtis, AAP Senior Political Writer
(Australian Associated Press)
Australia is in the midst of its first recession in 29 years after the economy shrank by 0.3 per cent in the March quarter.
New GDP figures have exposed the damage caused by the summer bushfires and the early stages of the coronavirus pandemic.
Annual growth slowed to 1.4 per cent.
That’s the slowest rate since September 2008, when Australia was plunged into the global financial crisis.
The economic decline is only going to get worse, with most of the pain packed into the current quarter.
Treasurer Josh Frydenberg says the nation is now in a recession.
“That is on the basis of the advice that I have from the Treasury department about where the June quarter is expected to be,” he said on Wednesday.
Predictions during the early stages of the pandemic had painted “the economist’s version of Armageddon” but the Treasurer said the March figures showed the economy had in fact been remarkably resilient.
The average contraction among OECD nations is six times greater than what Australia has experienced.
Shadow Treasurer Jim Chalmers said it was a bit rough to tell the 800,000 newly unemployed Australians the economy was resilient.
“This is about people’s jobs, it’s about their capacity to provide for the people that they love, it’s about all of the uncertainty that people face in this recession, in the coming months and the coming years,” he said in Brisbane.
Australian Bureau of Statistics chief economist Bruce Hockman said Wednesday’s figures capture just the beginning of the expected economic blow from the measures to contain the coronavirus.
The size of the hit was cushioned by increased government spending, which added 0.3 points to GDP, and strong exports adding 0.5 points.
But household spending dropped by 1.1 per cent over the quarter, the first decline since December 2008.
There was an unprecedented fall in spending on services as social distancing rules and travel bans were introduced, partially offset by a rise in goods bought.
“This is the story of what was happening in the economy as we saw panic buying in our supermarkets, but we saw people increasingly staying at home,” Mr Frydenberg said.
The Reserve Bank and Treasury have said the bushfires probably knocked 0.2 points off the GDP.
The June quarter numbers, which will be revealed in September and feed into the October 6 federal budget, are expected to be in the realm of a nine per cent contraction.
But the Reserve Bank says the economic slump might not be as bad as previously thought given the success on the health front.
CommSec chief economist Craig James said stimulus will probably lead to a healthy lift in the second half of the year – as long as the virus stays under control.
“It will be important for the federal government and Reserve Bank to ensure that the downturn is brief and that Aussies quickly return to work,” he said.
“That way the economy, and life generally, will quickly return to some sense of normalcy.”
Mr Frydenberg said there were already hopeful signs, including nine weeks of consumer confidence increasing from a record low.
He will give a detailed mini-budget update on July 23 (which was pushed back a month) that will include the response to a review of the JobKeeper wage subsidy.