“This crisis is unlike any other,” Australian Treasurer Josh Frydenburg told a press conference. “Today’s devastating figures confirm what all Australians know, which is that COVID-19 has wreaked havoc on our economy and our lives like we have never experienced before,” he said. added.
The 7% drop in GDP was the biggest quarterly drop since records began in 1959, the Australian Bureau of Statistics (ABS) said in a statement.
The Australian economy managed to continue to grow during the Asian financial crisis of 1998, the dot-com crisis of 2000-2001 and the global financial crisis of 2008-2009, aided by a combination of strong demand from China for raw materials such as coal and iron ore. and a seemingly insatiable domestic appetite for housing and consumer goods.
But it was the drop in household consumption, which accounts for more than half of Australia’s economic activity, that weighed the most on the April-June figures. The 12.1% drop in consumption reduced GDP by 6.7 percentage points as people stayed at home and shops and restaurants closed.
“Service spending fell 17.6%, with declines in transportation services, vehicle operations and hotels, cafes and restaurants,” the statistics office said. “The June quarter saw a significant contraction in household spending on services, as households changed their behavior and restrictions were put in place to contain the spread of the coronavirus. “
Victory in crise
The other big reason for the drop has been an increase in cases in Victoria state since July.
Australia has recorded nearly 26,000 total cases and 663 deaths from the virus so far, according to the United States-based Johns Hopkins University, far fewer than many other developed countries
The vast majority of cases in the past two months have been in Victoria state and its capital Melbourne, emerging after the country’s initial success in containing the virus.
Victoria implemented a state of emergency last month, with stiff penalties for anyone caught violating isolation orders. Frydenburg said the measures imposed by Victoria would impact Australia’s economic performance beyond second-quarter data.
“It is important to recognize that this fall of the June quarter does not include the economic impact of the Stage 4 restrictions imposed by the Victorian government in early August,” he said.
Victoria Prime Minister Daniel Andrews said earlier this week that the state government will issue a “road map” to ease restrictions and a nighttime curfew in Melbourne next Sunday, but has stressed that changes would be incremental and would be guided by science and public health concerns.
But, despite the situation in Victoria, some analysts see a partial recovery nationwide in the third quarter.
“In the future, production will continue to decline in Victoria as [the third quarter] restrictions on activity tightened further following its second wave. However, activity will rebound elsewhere, ”said Marcel Thieliant, senior economist for Australia and New Zealand at the research firm Capital Economics in a note sent to Al Jazeera.
“We think the recovery outside Victoria will be enough to generate a small 0.5 [percent quarter-on-quarter] go up [third quarter] PIB, » Thieliant added.
Frydenburg said he sees “slightly negative or flat” growth for the three months ending in late September. The country’s central bank, the Reserve Bank of Australia, estimates the economy will shrink by 6% over the whole of 2020.
But Robert Carnell, regional head of research at Dutch bank ING, said Australia’s performance compares favorably with other countries in the Asia-Pacific region.
“There is a good chance that Australia will end up in the ‘less negative’ half of the table in terms of the cumulative loss of GDP since [the fourth quarter of 2019] goes, a little ahead of Japan, but behind the North Asian economies, China, Korea and Taiwan, ”Carnell said in a note sent to Al Jazeera.
Government programs have helped cushion some of the economic blow from the pandemic.
On Tuesday, Parliament agreed to extend until the end of March a 100 billion Australian dollars (73.6 billion dollars) program to support people who have lost their jobs.
But bi-monthly payments will drop 20% from September 28, and the scheme has been criticized by some opponents of the government as doing more to help business leaders than their employees.
Frydenburg said last month that the government expects Australia’s effective unemployment rate to exceed 13% by the end of September, mainly due to job losses in Melbourne due to its severe lockdown .
He said the unemployment rate was 9.9% at the end of July, down from a record 14% in April at the height of national coronavirus restrictions.