GDP figures from the Bureau of Statistics show Australia’s economy shrank 0.3 per cent in the March quarter, amid bushfires and the early stages of the coronavirus pandemic.

This makes it certain that Australia will suffer its first recession in 29 years, as the full impact of coronavirus-related shutdowns occurred during the current June quarter.

Economists widely define a recession as two consecutive quarters of GDP contraction, which are now certain to occur.

The last time Australia recorded two consecutive negative quarters for GDP was March and June 1991, dubbed by then treasurer Paul Keating as “the recession we had to have”.

Even before the full effect of the coronavirus hit, Australia’s economy recorded its slowest annual growth in more than a decade, according to the ABS.

“This was the slowest through-the-year growth since September 2009, when Australia was in the midst of the global financial crisis, and captures just the beginning of the expected economic effects of COVID-19,” the bureau’s chief economist, Bruce Hockman, said.

Economic ‘Armageddon’ avoided, Treasurer Josh Frydenberg says

While admitting that Australia is now in recession, Treasurer Josh Frydenberg said it could have been a lot worse.

“Treasury were contemplating a fall in GDP of more than 20 per cent in the June quarter. This was the economists’ version of Armageddon,” he told reporters at Parliament House.

“It was in this quarter — the March quarter — that consumer and business confidence fell to its lowest level on record. That the ASX 200 lost a third of its value and, on the 16th of March, saw its biggest daily fall of 9.7 per cent on record.

“When combined with the ongoing drought, which saw farm GDP fall by 2.4 per cent in the quarter, and the devastating impact of the fires that were raging across many states, one looks back on the March quarter, and there wasn’t much good news.

“Seen in this context, the fact that the Australian economy only contracted by 0.3 per cent shows the Australian economy’s remarkable resilience.

“Indeed, Australia’s performance in the March quarter compares very well to that seen in other nations, with negative growth of 9.8 per cent in China, 5.3 per cent in France, 2.2 per cent in Germany, 2 per cent in the United Kingdom and 1.3 per cent in the United States.”

However, Labor’s shadow treasurer Jim Chalmers took aim at the Government’s economic performance prior to the pandemic.

“While the pandemic came without warning, long-standing weakness in the economy did not,” he said.

“Even before the worst of this virus, even before the bushfires, we had issues with weak growth, and stagnant wages, and weak business investment, and productivity, and net debt in the budget had already more than doubled.

Sarah Hunter from BIS Oxford Economics said that the nation looks like escaping a worst-case scenario akin to the Great Depression.