Record slump shatters Australia’s growth streak – World – Chinadaily.com.cn

Treasurer Josh Frydenberg points out the downward trend at a news conference at Parliament House on Wednesday in Canberra.DAVID GRAY/GETTY IMAGES

SYDNEY-Australia fell into its deepest economic slump on record last quarter as coronavirus curbs paralyzed business activity, while fresh outbreaks threaten to upend any immediate recovery, piling pressure on the government to keep fiscal taps open.

Data from the Australian Bureau of Statistics, or ABS, on Wednesday showed the country’s A$2 trillion ($1.47 trillion) economy shrank 7 percent in the three months to the end of June from a 0.3 percent decline in the March quarter.

It means that Australia has fallen into recession for the first time in nearly 30 years, according to a report by the Australian Broadcasting Corporation.

Michael Smedes, head of National Accounts at the ABS, attributed the quarterly fall to the “global pandemic and associated containment policies”.

“This is, by a wide margin, the largest fall in quarterly GDP since records began in 1959,” he said.

A report from the ABS also showed that due to the increased number of recipients and additional support payments, social assistance benefits in cash rose to a record 41.6 percent.

Spending on services dropped 17.6 percent after a decrease in transport services, operation of vehicles and hotels, cafes and restaurants.

“The June quarter saw a significant contraction in household spending on services as households altered their behavior and restrictions were put in place to contain the spread of the coronavirus,” said Smedes.

“This crisis is like no other,” Treasurer Josh Frydenberg said.

“Today’s national accounts confirm the devastating impact on the Australian economy from COVID-19. Our record run of 28 consecutive years of economic growth has now officially come to an end.”

In a clear signal that the fiscal stimulus will keep flowing, Frydenberg added: “Our commitment to the Australian people is that we have your back. We will be with you through this crisis and… all the way out of this crisis.”

The contraction, which was deeper than median forecast of 5.9 percent, comes as Victoria state remains in a lockdown to curb the spread of the virus while international borders are shut too.

Victoria’s lockdowns

Frydenberg said Victoria’s lockdowns would weigh “heavily” on the September quarter GDP.

More than a million people have lost their jobs since March when Australia shut down entire sectors of the economy, hitting private-sector demand and investments.

The government did step up with more than A$300 billion of stimulus, though Wednesday’s gloomy data underlines the need for more stimulus as the recovery is expected to be uneven and bumpy.

“Looking ahead, it is clear that the path back from the COVID-19 recession will be protracted,” said Sarah Hunter, chief economist for BIS Oxford Economics.

“Growth in the September quarter will be weighed down by the lockdown in Victoria, and beyond these continued health concerns, ongoing restrictions and the dialing back of income support will all weigh on the economy,” Hunter added.

“We expect it to take until early 2022 for activity to return to pre-pandemic levels.”

Agencies – Xinhua

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