- Australian Treasurer Josh Frydenberg confirmed the country is in a recession on Wednesday.
- The acknowledgement comes after the first quarter GDP figures show the economy shrunk 0.3% largely before businesses were even shut by the government.
- With another contraction in the realm of 8.5% forecast for the June quarter, Australia has entered its first recession since 1991.
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Australia is in the midst of a historic moment it would have rather avoided.
An economic contraction of 0.3% in the first three months of the year, confirmed by official data on Wednesday, means Australia is undoubtedly in the middle of its first recession since 1991 – and only it's set to get worse.
"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," Treasurer Josh Frydenberg told media on Wednesday, confirming the country is today in recession.
It could have avoided one on a pure technicality had it grown or even remained stagnant in the March quarter.
That's because a recession is defined by two consecutive quarters of negative growth. With COVID-19 shutting down large swathes of the economy, the June quarter is expected to see the largest contraction since the Great Depression. The three months following it meanwhile look certain to return to growth as the economy reopens.
While a negative first quarter doesn't really make much difference in the grand scheme of things, it could have opened the door to denialists and revisionists.
Wednesday's official numbers have helped at least kill off that possibility, with the Treasurer laying out the challenge ahead.
"Clearly, with this once in a century pandemic, the impact on the economy has been very severe, the impact in the June quarter will be even more severe, we’ve climbed this mountain before, we’ll climb it again," Frydenberg said.
The Treasurer flagged businesses as critical to the recovery, with more to be done to shore up confidence.
"Business confidence has only picked up about a third of its losses from March, whereas consumer confidence has picked up 95% of its losses since March, as those restrictions have eased, consumer confidence has come back," he said.
"Whether it's infrastructure, tax, industrial relations, skills, deregulation – that's what's going to drive business confidence."
He also revealed any changes to JobKeeper stemming from this month's review will be announced alongside a budget update in July.
On a positive note, the GDP figures indicate how Australia shapes up against the rest of the world, with the decline "relatively modest", according to IFM chief economist Alex Joiner.
It was just less than one-quarter of the US contraction, one-sixth of the UK's, and 17 times smaller than the hardest-hit European economies.
However, given an Australian shutdown took place in the second quarter, and is expected to produce an 8.5% contraction, the economy is hardly out of the woods just yet.