Economy

Australia breaks 29-year growth streak and falls into recession

Australia breaks 29-year growth streak and falls into recession”

Economic activity collapsed by record seven per cent in the June quarter as a result of coronavirus lockdowns.

AUSTRALIA tumbled into its first recession in nearly three decades with its pandemic-crippled economy shrinking a record 7 per cent in the second quarter, official data shows.

The Australian dollar fell after the report, trading at 73.41 USA cents at 11:33 a.m.in Sydney from 73.60 cents. The bureau's head of national accounts, Michael Smedes, said the pandemic and containment efforts were to blame for the "unprecedented" drop that exceeded previous records "by a wide margin".

The economy shrank 7 percent in June, the biggest contraction since records began in 1959, the government reported.

The drop was the largest by percentage since comparable records started being kept in 1959.

This is the worst economic growth in 61 years due to a severe contraction in household spending on goods and services.

Against the backdrop Treasurer Josh Frydenberg is stitching together a federal budget to be delivered on October 6.

"Our Australian economy has been savaged by the COVID-19 global pandemic and recession".

More news: Coronavirus: No deaths and 95 new COVID-19 cases today

The second consecutive quarter of GDP contraction has also ended Australia's 29-year, world-record run of avoiding a recession.

"Our commitment to the Australian people is that we have your back".

"We were hit by an unexpected crisis which came out of nowhere and clearly the first priority was to protect people's health and save people's lives by suppressing the spread of the virus and that was absolutely necessary", he said.

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 worldwide borders are shut too.

The Victorian restrictions will weigh heavily on growth figures for the September quarter, which won't be released until December.

Since March, more than a million Australians have lost their jobs.

The government did step up with more than A$300billion of stimulus, though the gloomy data underlines the need for more stimulus. The fall in the June quarter reflected the government economic response to the COVID-19 pandemic, which resulted in a record high subsidy payments of $55.5 billion and reduced tax income received.

Looking forward, Chief Economist at BIS Oxford Economics Sarah Hunter told Xinhua that Australia's economy would continue to feel the weight of Victoria's virus outbreak in the figures for the current quarter and likely wouldn't return to pre-pandemic levels until 2022.



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