COVID-19 impact: Australia’s economy takes sharpest dive since Great Depression-era of 1930s

Canberra: Australia’s economy suffered its sharpest economic contraction since the Great Depression due to the pandemic, with data released Wednesday confirming the country is in its first recession in 28 years. The economy shrank 7% in June, the biggest contraction since records began in 1959, the government reported.

Prime Minister Scott Morrison told Parliament: “This is a devastating day for Australia.” The country is now in recession for the first time in 28 years following a 0.3% drop in the first quarter of the year, since it has logged two straight quarters of contraction.

“Today’s national accounts confirm the devastating impact on the Australian economy from COVID-19,” Treasurer Josh Frydenberg said, adding “Our record run of 28 consecutive years of economic growth has now officially come to an end.”

The previous biggest downturn since Australia began keeping records in 1959 was a 2% fall in June 1974. Economists estimate a sharper decline of 9.5% in 1930 when Australian became one of the countries worst affected by the Great Depression.

Prime Minister Scott Morrison told Parliament: “This is a devastating day for Australia.” The Organization for Economic Cooperation and Development figures shows the average contraction among OECD countries in the June quarter was 9.8%, including a 20.4% slump in Britain, a 13.8% downturn in France, and a 9.1% drop in the United States.

The biggest drag on the Australian economy was a 12.1 % drop in household spending, the largest on record. That alone accounted for 6.7 percentage points of the 7% fall, with business and dwelling investment also down. But Australia’s iron ore miners have benefited from greater pandemic disruptions to their main rivals in Brazil.

Mining investment increased by 1.3% in the quarter, and high iron ore prices paid by China contributed to a 17.7 billion Australian dollar (USD 13 billion) trade surplus, the largest on record.

June quarter results do not reflect the second lockdown in coronavirus hot spot Victoria state that began in early August. Victoria accounts for a quarter of Australia’s business activity.

Frydenberg said the Treasury Department was forecasting ‘slightly negative or flat’ growth in the September quarter.