(Australian Associated Press)
Scott Morrison has lamented a heartbreaking blow to Australia after the economy shrank seven per cent in the June quarter, confirming the first recession in three decades.
The Australian Bureau of Statistics on Wednesday confirmed the largest quarterly contraction on record, driving home the hammer blow of the coronavirus crisis.
In the year to June, gross domestic product fell 6.3 per cent.
Two consecutive quarters of contraction in June and March, when gross domestic product fell 0.3 per cent, put Australia into technical recession.
Prime Minister Scott Morrison said it was a devastating day for Australia.
“Our Australian economy has been savaged by the COVID-19 global pandemic and recession,” he told parliament on Wednesday.
“It is delivering an awful and heartbreaking blow to Australians and their families all around the country.”
He cautioned against long-term reliance on support programs like wage subsidies and the increased dole, which will be scaled down from September.
“The path to recovery will not be paved with endless support of the government,” the prime minister said.
Treasurer Josh Frydenberg said the September quarter figure is expected to be slightly negative or flat as it includes Melbourne’s second lockdown.
“Behind these stories and these numbers are heartbreaking stories of hardship being felt by everyday Australians as they go about their daily lives,” he told reporters in Canberra.
“Today we are reporting these numbers, but today everyday Australians are living them.”
The government is pointing to JobMaker – a range of programs to boost skills, stimulate home building projects and encourage industrial relations flexibility.
It also brings forward spending on major infrastructure projects and $250 million for the arts industry.
But Labor and unions argue a more comprehensive jobs plan is needed to jump-start the ailing economy.
Shadow treasurer Jim Chalmers said it was a dark day.
“This Morrison-Frydenberg recession is deep and it’s devastating for millions of Australians and their families,” he told reporters in Canberra.
“We’re in the teeth now of a full blown jobs crisis but the Morrison government still doesn’t have a jobs plan to respond to it.”
Business Council of Australia chief executive Jennifer Westacott said the figures showed the monumental recovery task ahead.
“We need a recovery plan that is driven by the private sector, focused on job creation and getting investment going again – and we don’t have any time to waste,” she said.
Australian Council of Trade Unions president Michele O’Neil said the government attacked Victoria for not producing a road map out of lockdown while lacking its own comprehensive jobs plan.
“These are the worst economic figures ever recorded, we are in an unprecedented economic and public health crisis, and yet the Morrison government has no plan for a way out,” she said.
Victoria recorded six deaths and 90 new cases on Wednesday, up slightly from the previous day.
The national death toll is now 663.
- We dodged and weaved around the global financial crisis.
- We skipped past the Asian financial crisis and side-stepped the post-Dom.Com bubble recession.
But the Australian economy has finally been floored by the killer punch of a once in a century pandemic.
Australia’s impressive world record expansion of 29 years has finally come to an abrupt halt.
But even then, statistics show the nation’s first recession since the one Paul Keating said we had to have is milder than most. At least at this stage.
The latest national accounts showed the economy shrank 7.0 per cent in the June quarter, the biggest contraction since at least the late 1950s when the Australian Bureau of Statistics started plotting the country’s economic growth.
Combined with a smaller 0.3 per cent fall in the March quarter, the definition of a technical recession has been fulfilled.
Yet as traumatic as the downturn is, recent Organisation for Economic Cooperation and Development figures show the contraction among OECD countries in the June quarter was 9.8 per cent, including a 20 per cent slump in the UK and a 14 per cent downturn in France.
When COVID-19 first hit Australian shores and restrictions were put in place in March, the fear was the country would also see a contraction of around 10 per cent.
But before we get too smug, there are now more than one million people without a job, many for the first time, because of the pandemic and Treasury anticipates a further 400,000 people could be joining them before Christmas because of Victoria’s harsh restrictions.
Worse still, more than 25,000 people have caught the deadly virus and more than 660 families are mourning the passing of their relations, most of whom had been living in aged care homes.
How quickly the economy recovers from here will be down to how far COVID-19 can be suppressed, whether the country can avoid harsh restrictions like in Victoria and the success of finding a vaccine.
Already some economists are worried the September quarter could record another negative result given Victoria makes up around 25 per cent of the national output.
And will the economy still be able to get off the canvas in the December quarter when support measures from JobKeeper and JobSeeker are reduced?
We won’t know that one until those national accounts are released in March next year, by which time at least 2020 will be finally dead and buried.