Statistics have confirmed that Australia is in the midst of a recession as the GDP plummets 7% in the June quarter of 2020, according to the latest figures from the Australian Bureau of Statistics (ABS).
Following a drop of 0.3% in the March 2020 quarter, the ABS has confirmed that Australia’s gross domestic product (GDP) dropped by 7% in the three months leading up to June, the largest single quarter drop on record, according to the ABS.
Head of National Accounts at the ABS, Michael Smedes has said that “the global pandemic and associated containment policies led to a 7.0 per cent fall in GDP for the June quarter. This is, by a wide margin, the largest fall in quarter GDP since records began in 1959.”
The ABS says that private demand reduced the GDP by 7.9 percentage points, as household consumption dropped by more than 12%. Looking further, the ABS says that spending on services dropped by a staggering 17.6%, as transportation services, hotels, cafes and restaurants were massively impacted by government restrictions.
“The june quarter saw a significant contraction in household spending on services as households altered their behaviour and restrictions were put in place to contain the spread of the coronavirus,” The ABS’ Smedes said.
The ABS adds that net trade was able to add 1.0 percentage point to the GDP figure, while imports of products fell by 2.4 per cent, and weak demand and less household spending attributed to a drop in the consumption.
Imports of services fell a dramatic 50.5%, while export services reported drops of 18.4% in light of travel restrictions.
According to the release from the ABS, “the household saving to income ratio rose to 19.8 per cent from 6.0 per cent, driven by the fall in consumption expenditure. Hours worked fell a record 9.8 per cent, outpacing the record 2.5 per cent decline in wages which were supported by JobKeeper payments.”
“Social assistance benefits in cash rode a record 41.6 per cent, due to increased number of recipients and additional support payments.”
In terms of government expenditure, its net saving figure fell from $1.2 billion to -$82.6 billion, driven by the raft of stimulus packages unveiled that amounted to around $55.5 billion, as well as a reduction in the rate of income tax collected.
Concluding the release, the ABS says that it will be publishing a paper called “A series of unprecedented events – the June quarter of 2020,” on September 14th, which will combine statistics and insight from economists on the impact of the coronavirus on Australia’s domestic economy.