Australia Sees A$50 Billion Hit to Its Economy in June Quarter
(Bloomberg) -- Australia’s coronavirus lockdown will see gross domestic product plunge 10% in the June quarter, wiping A$50 billion ($32 billion) from the economy, according to Treasurer Josh Frydenberg.
“Notwithstanding Australia’s success to date on the health front, and the unprecedented scale and scope of our economic response, our economic indicators are going to get considerably worse in the period ahead before they get better,” Frydenberg will say in an a speech on Tuesday. “Some of the hardest hit sectors like retail and hospitality are among the biggest employers.”
The Treasury forecast cited by Frydenberg is a further indication that Australia may be spiraling toward its first recession since 1991 as large tracts of the service sector are shuttered to stem the outbreak.
While Prime Minister Scott Morrison is expected to announce plans to ease lockdown restrictions on Friday, the damage to the economy has already forced the central bank and conservative government to deliver a massive fiscal-monetary injection worth 16.4% of GDP to cushion households and help businesses to survive and retain workers.
As a small open economy, the weak global backdrop may also constrain Australia’s economic recovery, according to Bloomberg economist James McIntyre, who has forecast the nation will suffer its deepest recession in 90 years. Still, Frydenberg said Australia had done well in limiting the health impact of the virus without entirely closing significant sectors of the economy.
Australia has had about 6,800 cases with less than 100 fatalities. The daily growth of new infections has slowed to less than 1%, but there are concerns clusters could jeopardize a quick end to the lockdown that’s seen people told to stay home except for essential shopping, work, medical appointments or for exercise.
“As we cross the bridge to recovery, Australia has the advantage of having made real progress in suppressing the spread of the virus without having to resort to a full lockdown as has been the case with some other nations,” Frydenberg said, according to extracts released by his office. “Significant sectors of our economy like agriculture, mining and construction have been able to adapt to the new health restrictions and in most cases continue to operate.”
Frydenberg reiterated previous Treasury forecasts that unemployment in June quarter will almost double to 10%. For every extra week the current restrictions remain in place, Treasury estimates there would be close to a A$4 billion reduction in economic activity from a combination of reduced workforce participation, productivity, and consumption, Frydenberg said.
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