Recession confirmed as COVID-19 sees Australia’s economy post its biggest fall on record
Australia is officially in its first recession for almost three decades, with the June quarter GDP numbers showing the economy went backwards by 7 per cent, the worst fall on record.
The Bureau of Statistics numbers out today also confirmed the March quarter’s 0.3 per cent decline, meaning Australia’s economy has gone backwards for two consecutive quarters, meeting a common definition of recession.
It is the first time this has happened since 1991, although the scale of the downturn is vastly greater than “the recession we had to have”, where the economy shrank 1.3 and 0.1 per cent.
The record fall in economic activity was driven by the private sector, much of which was shut down or restricted due to efforts to contain the COVID-19 pandemic.
Private demand took 7.9 percentage points off the economy, while a trade surplus and increased government spending added back 1 and 0.6 percentage points respectively.
The biggest drop in private spending came from a massive 12.1 per cent plunge in household expenditure, led by a 17.6 per cent fall in services spending, as many of these businesses were shut for part of the three-month period and restricted for the rest of it.
With fewer ways to spend money available, and amid financial concerns from the pandemic, households were saving around $20 for every $100 they earned, a big increase from $6 at the start of the year.
But people also earned a lot less, with a record 2.5 per cent drop in total wages, which the ABS said would have been much bigger without JobKeeper support.
However, those already not working saw a boost to their incomes, with social assistance payments jumping 41.6 per cent due to the additional coronavirus supplement as well as a greater number of people claiming unemployment benefits.
More to come.