The country’s economy shrank 0.3% in the first three months of this year from the previous quarter, according to the Australian Bureau of Statistics. Treasurer Josh Frydenberg on Wednesday warned that GDP would shrink in the April-June period, marking the second consecutive quarter contraction for Australia.
Despite the recession, Frydenberg said Australia had “avoided the economic fate and health fate of other countries because of the actions it had taken, including economic stimulus efforts.
Australia’s GDP is likely to “plummet” by 9% in the second quarter, according to Ben Udy, an economist for Australia & New Zealand at Capital Economics.
“GDP fell before the virus restrictions were put in place and is set to fall sharply in Q2 [the second quarter] before taking it gradually in the second half of the year, “he wrote in a research note on Wednesday.
The drop in GDP during the first quarter was mainly because consumers reduced spending on services as they began to move away socially, Udy said.
Udy estimates consumption will be almost 20% below pre-virus levels in the second quarter, as households stop panicking buying food and restrictions on recreation and retail services are introduced.
While rising iron ore prices could support mining investment, non-mining companies significantly reduce their investment plans, he said.