Australia is bracing for its first recession in 29 years after its Gross Domestic Product (GDP) fell in the first quarter of 2020. A recession is defined as two quarters in a row of economic contraction, or shrinking GDP.
Compared with the same period last year, Australia’s gross domestic product expanded by 1.4%. However, it was still the slowest expansion since the 2008-2009 global financial crisis.
Data released by the Australian Bureau of Statistics (ABS) shows the economy shrank by 0.3% in the first three months of 2020, compared with the last three months of 2019. This was mainly caused by bushfires and the early stages of the coronavirus outbreak.
Household consumption exhibited the biggest drag on growth last quarter, falling 1.1%. This is the first fall since December 2008, and the largest quarterly decline in 34 years.
Spending on services fell 2.4% with the introduction of social distancing restrictions and travel bans in February and March, with massive falls in spending on clothing, cars, transport, recreation, hotels, cafes, and restaurants.
Australia’s $1.39 trillion economy is facing its worst contraction since the Great Depression, with almost 600,000 jobs lost in April alone and much of the economy in lockdown to contain the coronavirus.
In March, the Reserve Bank of Australia, the country’s central bank, cut its main interest rate to a record low of 0.25%. It also launched an unlimited bond-buying program.
The latest GDP figures show that Australia’s economy was already struggling from devastating bushfires, a decline in tourism as well as weak domestic demand even before the virus-related restrictions.
Last month Japan fell into recession for the first time since 2015 as the world’s third-biggest economy shrank at an annual pace of 3.4% in the first three months of the year.
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