The Australian government on Wednesday said the country is in a recession for the first time in almost three decades after the economy was battered by severe bushfires and the coronavirus pandemic.
Treasurer Josh Frydenberg disclosed that the economy shrunk by 0.3 per cent in the first three months of the year, amid bushfires and the early stages of the COVID-19 outbreak.
Responding to a query about Australia in recession, Frydenberg said he believed it was.
“The answer to that is yes. And that is on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be,” Frydenberg said, according to media reports.
A recession is generally defined as two consecutive quarters of GDP decline. “The Treasury was contemplating a fall in GDP of more than 20 per cent in the June quarter. This was the economists” version of Armageddon,” he said while speaking to reporters at Parliament House.
The combined devastation of the bushfire season and the ongoing coronavirus pandemic are being cited for the economic downturn.
The 2019-20 bushfires in Australia killed 33 people and destroyed 3,094 homes. More than 11 million hectares of land has been scorched.
Due to the coronavirus outbreak in the country, many businesses were shut and international borders were closed to stem the spread of the disease, costing the economy billions of dollars.
Australia has recorded about 7,200 cases and 102 deaths from coronavirus, with many regions now regularly reporting zero new daily cases.
“It was in this quarter — the March quarter — that consumer and business confidence fell to its lowest level on record. The Australian Securities Exchange 200 lost a third of its value and, on March 16, saw its biggest daily fall of 9.7 per cent on record.
“When combined with the ongoing drought, which saw farm GDP fall by 2.4 per cent in the quarter, and the devastating impact of the bushfires that were raging across many states, one looks back on the March quarter, and there wasn”t much good news.
“Seen in this context, the fact that the Australian economy only contracted by 0.3 per cent shows the Australian economy”s remarkable resilience,”” he added.
According to the Australia Bureau of Statistics, Gross domestic product (GDP) grew just 1.4 per cent in the 12 months to March 31 as the economy took a hit from the bushfires and the beginning of the coronavirus crisis.
Frydenberg said the Government would provide an update on both the economy and stimulus programs in July this year.
“The Finance Minister and I will be providing a detailed update on the economic numbers now in July as opposed to June, and we”re doing so because we”re going to announce, at the same time, the outcomes of our JobKeeper review,” he said.
He says the continued easing of coronavirus restrictions will encourage Australians to return to their usual spending habits and encourage business owners to scale back their dependence on JobKeeper.
“The fact that those restrictions are now being eased and they can have customers come through the door will mean that that transition off that support will be easier for a business like that,” he said.