As was widely expected, the Australian economy fell into contraction during Q1 2020 and raises worries that the country could enter its first technical recession in 30 years as a result of the coronavirus pandemic. According to data released by the ABS, the GDP for the first three months of the year came in at -0.3%, while the annual growth slowed down to 1.4%, the lowest rate seen since the global financial downturn back in 2009.
As a result of the lockdown, household consumption was hit the hardest and contributed the most to the decline in economic activity across Australia. Consumers were unable to spend money on purchases of non-essential goods as well as eating out during the lockdown which was enforced.
GDP figures, meanwhile, received some support from higher government spending and exports during Q1. The GDP for the next quarter is expected to come in even worse, with a more severe contraction forecast for Q2 2020, which would point to a technical recession after GDP contracts over two consecutive quarters.
Economists expect recovery to take longer as spending is likely to remain weak into the second half of the year, even though Australia has eased lockdown measures and restarted economic activity. The construction sector, business investment and import of capital goods are likely to remain under pressure even as the economy reopens.