The country’s economy contracted 0.3% in the first three months of the year from the previous quarter, according to the Australian Bureau of Statistics. Treasurer Josh Frydenberg warned on Wednesday that GDP will decline in the April-June period, marking the second consecutive quarter contraction for Australia.
Despite the recession, Frydenberg said Australia “has avoided the fate of the economy and the fate of health” from other countries because of the actions it has taken, including economic stimulus efforts.
Australia’s GDP is likely to “plummet” by 9% in the second quarter, according to Ben Udy, Australian and New Zealand economist at Capital Economics.
“GDP was falling before virus restrictions were enforced and is expected to drop more sharply in the second quarter [the second quarter] before gradually starting 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 due to consumers reducing spending on services when they began to distance themselves socially, Udy said.
Udy expected consumption to be nearly 20% lower than its pre-virus levels in the second quarter as households stopped panicking and restrictions were placed on recreation and retail services.
While rising iron ore prices may support mining investment, non-mining companies have significantly reduced their investment plans, he said.