The country’s economy declined 0.3% in the first three months of the year from the previous quarter, according to the Australia Bureau of Statistics. Treasurer Josh Frydenberg on Wednesday warned that GDP will drop in April-June, marking the second consecutive quarter of contraction for Australia.
Despite the recession, Frydenberg said that Australia “avoided the fate of the economy and the fate of health” in other countries because of the actions taken, including economic stimulus efforts.
Australian GDP will “plummet” by 9% in the second quarter, according to Ben Udy, an economist for Australia and New Zealand at Capital Economics.
“GDP was falling before virus restrictions were in place and is expected to decline more sharply in the second quarter [the second quarter] before gradually resuming in the second half of the year, “he wrote Wednesday in a research note.
The drop in GDP in the first quarter was mainly due to the fact that consumers cut back on services when they started to distance themselves socially, Udy said.
Udy expected consumption to be nearly 20% below pre-virus levels in the second quarter, when families stopped panicking by buying food and restrictions on recreational and retail services were introduced.
While rising iron ore prices may support investment in mines, non-mining companies have significantly reduced their investment plans, he said.