Australia Recession 2020: Economy Expected To Drop 9% In Q2

By on
Australia, recession, facemask, coronavirus
A woman walks past a closing down sign on an empty shop in Melbourne's central business district on June 3, 2020. - Australia is heading for its first recession in nearly three decades after the economy shrunk in the January-March quarter, with a "far more severe" reading expected in the next three months as the effects of the virus shutdown bite. WILLIAM WEST/AFP via Getty Images

Australia suffers its first recession in 29 years, an indication of the massive effects the coronavirus pandemic has on the economy. 

The economy has suffered a minimal 0.3% contraction in the first three months of the year, the Australia Bureau of Statistics confirmed. But the nightmare is just beginning. According to Treasurer Josh Drydenberg, the country is facing a much bigger plunge in the second quarter of the year.

“The June quarter, the economic impact, will be severe. Far more severe than what we have seen today,” Frydenberg said

Recession is often defined as a decline in a country’s GDP for two consecutive quarters. 

Data points to a GDP “plummet” of 9%, the second straight quarterly contraction and ending a 29-year run of economic growth that dated back to the early-90s. Despite this, Frydenberg said Australia is still fortunate it “avoided the economy fate” of other countries because of the strategies it took to curb the effects of the COVID-19 pandemic, including stimulus efforts for businesses. 

Ben Udy, an economist for Capital Economics, echoes this sentiment. He also said the economy will slowly pick up in the second half of 2020.

“GDP was falling before the virus restrictions were in place and is set to fall more sharply in Q2 [the second quarter] before picking up gradually in the second half of the year,” he said in a note released Wednesday.

Udy added the fall in GDP was mainly because of the COVID-19 lockdown, wherein people were cutting back on spending as they stayed at home. A significant drop in tourism and exports due to the pandemic spreading across the globe, and the bushfires in late 2019 have also contributed to the economic shrinkage. 

Join the Discussion