The Australian economy has officially plunged into recession after the Gross Domestic Product (GDP) contracted by 7% in the April-June 2020 quarter, as compared to the previous quarter.
The major factor for driving the economy into recession is Coronavirus (COVID-19) and subsequent lockdowns. Australian economy has gone into recession after 29 years. Australia was the only major economy to avoid a recession during the 2008 global financial crisis, mainly due to demand from China for its natural resources. As per the Australian Bureau of Statistics, this is the biggest fall since records began back in 1959 and comes after a fall of 0.3% in the first quarter. An economy is considered to be in recession if it sees two consecutive quarters of negative growth.
The household consumption, which accounts for more than half of the Australian economy, fell by 12.1%. This reduced the GDP by 6.7% as people stayed home, and shops and restaurants stayed shut. The spending on services also fell by 18%. Trade also took a hit during the quarter, with imports of goods reducing by 2.4% and exports contracting by 18.4%. In the previous quarter, the wildfire which Australia had never seen in years, impacted the tourism industry.
The State of Victoria is reporting big spike in COIVD-19 cases since July. This continues to impact the economy. There are 25,923 cases in total and there have been 663 casualties.
Speaking on the current quarterly results, the Treasurer – Josh Frydenberg said, “We have done everything possible to cushion the blow for the Australian community from Covid-19.”
He further added, “Our priority has and will continue to be saving lives and ensuring that Australia’s healthcare system has the capacity to test and to trace and to treat coronavirus cases.”
Taking it to twitter, Josh tweeted, “Today’s National Accounts confirm the devastating blow to our economy from #COVID19. Our Government’s plan for the recovery is seeing hundreds of thousands of Australians getting back to work & thousands of businesses reopening their doors. There is hope & there is a road out.”
The Reserve Bank of Australia has said the pace of recovery in uncertain as they don’t know how long the pandemic will last. The recession will keep pressure on the Reserve Bank of Australia to consider additional measures to keep the economy afloat. The central bank has already reduced its cash rate to an all-time low to help businesses and household weather the downturn.
Nearly 1 million people lost their jobs due to COVID-19. Besides, the country faces escalations in relations with its biggest trading partner China for openly backing a global inquiry into the origins of the COVID-19, which Chinese didn’t like. The Government has already infused U.S. $ 147 billion as a stimulus to revive the economy.
Despite this, Australia is much better than other leading economies. The United States (U.S.) economy fell by 9.5% between April and June 2020, while United Kingdom’s (U.K. ‘s) economy shrank by 20.4%. The French economy fell by 13.8% and Japan’s by 7.6%.
