Chris Uhlmann: Australia's coronavirus recession recovery could be lengthy

Andrew Cummings
June 3, 2020

Australia's economy contracted in the first three months of the year, setting up an end to a almost 29-year run without a recession as an even deeper slowdown looms for the current quarter.

Partly offsetting the falls were a rise in government spending, which added 0.3 percentage points to growth, and net trade, which contributed 0.5 percentage points as imports slumped while commodity exports held up reasonably well.

Wednesday's data from the Australian Bureau of Statistics showed the economy contracted by 0.3 percent in the first quarter ended March compared with the last three months of 2019, the first decline in nine years.

Australian Treasurer Josh Frydenberg is out on the wires now, via Reuters, expressing his take on the country's Q1 growth report. Frydengberg said the answer was clear. "That is on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be".


That's the first quarterly contraction since 2011, when cyclone activity shut down businesses in Queensland and Western Australia.

The result sets up an end to Australia's record run of avoiding two consecutive quarters of shrinking GDP - the definition of a recession - having dodged them during the 1997 Asian Financial Crisis, the Dot-Com Bubble and the global financial crisis.

"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 bureau's chief economist, Bruce Hockman, said in a statement.

"Less than 100 days ago, our nation was on the edge of an economic cliff", he said.


"The number of coronavirus cases was increasing by more than 20 per cent per day".

"While fear of a lockdown saw panic-buying of food and household items, total consumption still fell by 1.1 per cent in the quarter", he said.

"Q1 fall in consumption was largest in 34 years".

The biggest spending falls were in those areas most severely affected by travel and social-distancing restrictions, such as transport services (-12 percent), hotels, cafes and restaurants (-9.2 percent), and arts and recreation.


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