Australia struck by historic slump as GDP takes a knock

SYDNEY: Australia’s economy is in recession, the country’s treasurer said on Wednesday, after official data showed gross domestic product fell last quarter as entire business sectors were shut down to fight the coronavirus.

Data from the Australian Bureau of Statistics (ABS) showed the A$2 trillion ($1.39 trillion) economy contracted 0.3% in the quarter ended March, the first decline in nine years.

That took the annual growth to 1.4%, the slowest since the 2009 financial crisis, as the economy was hit by the worst bushfire season in living memory, a prolonged drought and a pandemic that shut down businesses.

When asked if the country was already in recession, Australia’s treasurer Josh Frydenberg answered in the affirmative.

“Based on what we know from Treasury, we’re going to see a contraction in the June quarter, which is going to be a lot more substantial than what we have seen in the March quarter,” he told reporters in Canberra.

Two consecutive quarters of contraction would mark Australia’s first technical recession since the early 1990s, ending one of the world’s longest growth streaks. Following the data release, the Australian dollar eased from a five-month high of $0.6982.

Household consumption was the biggest drag on growth last quarter with massive falls in spending on clothing, cars, transport, recreation, hotels, cafe and restaurant. Net exports and government spending supported the economy in the quarter.

The economic fallout deepened in Australia as the number of local coronavirus cases surged from less than 100 in early March to more than 7,000 now, forcing the government to shut borders and restrict large gatherings.

The central bank stepped in by cutting the cash rate to a record low 0.25% and launching an unlimited bond buying programme. The government, meanwhile, unleashed a large fiscal stimulus plan, including a A$60 billion wage subsidy scheme.

UNIVERSITIES COULD LOSE $11 BILLION Australian universities could lose up to US$11 billion dollars as an indefinite coronavirus border closure locks out the foreign students who keep the sector afloat, the industry said on Wednesday.

Lobby group Universities Australia said the revenue shortfall would have a lasting impact on not only higher education staffing and facilities but also undermine the sector’s world-class research and innovation.