Australia’s Economic Growth Run Has “Officially” Ended
On Wednesday, Australia becomes the largest country to officially enter a recession as the coronavirus pandemic continues to devastate economies globally.
The Australia Bureau of Statistics released its data on Wednesday. It showed how Australia’s economy shrank 7% in the June quarter, following a 0.3% decline in the March quarter.
It was the largest quarterly fall which plunged the country’s economy into a technical recession. According to the Reuters poll, the GDP for the June quarter fell below economists expectations of a 5.9% decline.
Josh Frydenberg is Australia’s treasurer. Moreover, Josh Frydenberg told reporters that Australia’s record run of 28 consecutive years of economic growth had officially ended.
Josh Frydenberg added that the devastating data confirmed what every Australian knew. That COVID-19 had wreaked havoc in Australia and their lives like nothing they had ever experienced before. But there’s hope and a road out.
HSBC’s Paul Bloxham responded to the economic contraction saying the bank forecasted a “more downbeat” fall of 7.5%. He added that the bank expected weak services consumption. Bloxham is the British bank’s chief economist for Australia, New Zealand and global commodities.
The bank was uncertain about what would happen to services consumption given the large economic sways closed, and Australia had never had such an event before.
However, the economist acknowledged that the 7% GDP decline in Australia was better compared to other economies, especially those in the West.
For comparison, the UK’s second-quarter GDP dropped 20.4% while the US economy shrank by 32.9% in the same quarter.
Outbreak in Victoria
From now on, Bloxham said the “big debate” was now over whether Australia would see a pickup in economic growth into the third quarter – especially with the recent surge of coronavirus cases in Victoria state.
Bloxham added that 75% of the national economy, all states outside Victoria were on some recovery path. Victoria is going the other direction and still in lockdown.
Victoria is Australia’s most populous state, and stricter social distancing measures were put in place after a spike in coronavirus infections recently. Accounting for the pandemic’s effect on its economy, Bloxham said HSBC expected a small rise in Australia’s GDP in the third quarter.
He said they were expecting a stronger recovery to get going from the fourth quarter onwards, which is when they’re assuming that the Victorian economy would then start to reopen.
They are working with an assumption that the GDP is very weak but slightly positive in quarter three. In fact, the rest of the economy outside Victoria is driving it.
Bloxham added that by the time we get to quarter 4, the whole economy would be on some recovery path. It’s a revival they’re expecting in quarter four especially in Victoria giving them a stronger recovery path.
It gives Australia what the bank has been describing as a U-shaped recovery, said Bloxham.
