Australia tumbled into its first recession for nearly three decades with its pandemic-crippled economy shrinking a record seven percent in the second one quarter, official data shows.
With huge swathes of the domestic and global economy shut down to contain the lethal disease, commerce activity suffered a catastrophic drop — despite authorities providing billions of dollars in fortify — not even witnessed all through the global financial crisis.
“Today’s national accounts confirm the devastating affect on the Australian economy from COVID-19,” said Treasurer Josh Frydenberg.
“Our record run of 28 consecutive years of economic growth has now officially come to an end. The cause: a once-in-a-century pandemic,” he said.
The economy contracted seven percent in April-June from the preceding three months, in line with government forecasts, the Australian Bureau of Statistics said. That followed a 0.3 percent dip. A recession is defined as two consecutive quarters of contraction.
Gross domestic product dropped 6.3 percent year-on-year.
“The June quarter saw a remarkable contraction in household spending on products and services as households altered their behaviour and restrictions were put in place to contain the spread of the coronavirus,” said ABS head of national accounts Michael Smedes.
Hours worked fell nearly 10 percent while cash payments of social benefits rose more than 40 percent, both records, while imports and exports were also down.
The country was once already reeling from a prolonged drought and massive bushfires that rattled the economy before the disease struck.
The government has stumped up tens of billions of dollars to fight the economic fallout from the pandemic and Frydenberg said the contraction would have been far worse without such fortify, which included payments to employers to keep away from laying off staff.
“Today’s devastating numbers confirm what each and every Australian knows: that COVID-19 has wreaked havoc on our economy and our lives like nothing we have ever experienced before. But there is hope and there’s a Road out,” Frydenberg said.
Australia has confirmed nearly 26,000 cases of the disease and 663 deaths, in a population of 25 million, and had successfully contained it in lots of the country by July.
But an outbreak in Melbourne and its surrounds since then forced a new lockdown of five million people in the country’s second largest city, dragging on the recovery.
Borders between Australia’s states and territories also remain closed to most shuttle to keep away from further outbreaks, hampering tourism and other key sectors.
Authorities expect national unemployment to peak at 9.3 percent in December and the budget deficit to blow out to nearly a tenth of GDP by mid-2021.
Still, Frydenberg insisted Australia has been more successful than most in handling the crisis.
“This gives us confidence that as a nation we are better placed than most other nations, and that by containing the virus we will be able to chart a pathway to economic recovery and we will be able to leave the worst of the economic crisis in the June quarter in the back of us,” he said.
“But the Road ahead will be long. The Road ahead will be tough. The Road ahead will be bumpy.”