Australia is heading for a recession for the first time in nearly three decades, after a 0.3% contraction in GDP (Gross Domestic Product) in the first quarter, and a “much more severe” fall expected in the second, according to Treasury Minister Josh Frydenberg.
<span class="article__author">Alain Jeannin with AFP</span> <span class="separator">•</span>
<time datetime="2020-06-04T02:51:08+11:00" itemprop="dateModified"> updated june 4, 2020 at 2:51 a.m.</time>
This decline in the main economic indicator - slightly less than the -0.4% expected - is the first recorded since 2009, at the time of the international financial crisis.<h2><br/>
Containment measures to combat the virus have worsened Australia’s economic situation, already hard hit by prolonged drought and devastating forest fires.
Treasury Secretary Josh Frydenberg said the country is expected to enter recession in the second quarter for the first time since 1991. “The economic consequences will be severe. Much more serious than the ones we know today”he warned at a press conference.
Australian authorities have ordered the closure of many businesses and closed the country’s borders to combat the coronavirus outbreak, which has weighed heavily on the economy.
Frydenberg said, however, that the negative first quarter was not so bad compared to results from other countries, such as China, France and Britain.
He said the figures reflect the “remarkable resilience” of the Australian economy. The Australian government has taken steps to support the economy. In particular, he helped finance wages and asked for the postponement of rent payments while businesses returned to normal activity.
Millions of Australians have lost their jobs or have had their hours worked reduced. The authorities hope that the lifting of the restraint measures in stages will help to turn the economy around.
National Australia Bank economist Kaixin Owyong said GDP could fall by 8.4% over the next three months. But, in her view, the lifting of restrictions earlier than expected “suggests an economic recovery from the third quarter, with indicators… showing that spending is picking up as measures are eased.”
However, it warned that a real rebound was still a long way off, with borders remaining closed, which will continue to hurt trade. Australia has recorded some 7,200 cases of new coronavirus and reported 102 deaths.