Australia’s economy is expected to face the first recession in three decades due to the coronavirus pandemic. According to government officials, the economy will see a contraction of 7% in the second quarter and return to recovery in the third quarter of 2020. The pandemic will be fought with a massive stimulus package, meant to protect businesses, employees, and retirees. / Picture=Wikipedia
[Newsphopick=Kingsley Lim] Australia warned on Thursday that the second quarter will see the economy decline at breakneck speed, while budget deficit remains the largest since the Second World War. As the country’s officials and citizens brace itself to curb the spread of the coronavirus infections in the country, the government has pumped in $10 billion in aid to the economy to ameliorate the effects of the virus that has forced shutdowns in parts of the country.
At present, the Australian government has imposed a six-week lockdown of the city of Melbourne, the second largest city in Australia with a population of five million people. This has added to the hardships of the people and comes after a trying period of fighting bushfires and prolonged drought within the country.
According to officials, the Australian economy is currently facing a recession for the first time in three decades due to the coronavirus pandemic. Australia’s gross domestic product (GDP) for the second quarter (April to June) will see a contraction of 7 per cent. Since a recession is defined as two consecutive quarters of contraction, Australia is technically in a recession as the economy declined by 0.3% in the first quarter of the year.
Treasurer Josh Frydenberg said that budget deficit would expand by a tenth of its gross domestic product to AUD$185 billion, in the year to June 30, 2021. In the last 12 months, Australia’s GDP reached AUD $86 billion. "These harsh numbers reflect the harsh reality we face. The economic outlook remains very uncertain," said Frydenberg.
According to officials from within the government, the forecast deficit comes from the large stimulus spending which is meant to revitalise the economy, create jobs and prevent an economic depression. The economic stimulus package of AUD $289 billion, includes financial support for workers, retirees and small businesses in the country, which have been ravaged by the coronavirus pandemic.
Currently, unemployment in Australia is at a two-decade high of 7.4% This is expected to worsen and rise to 9.3% by December of this year. The Australian dollar also weakened by 0.3%, while the ASX 200 remained relatively flat.
Despite these, the government believes that the economy will return to growth in the third quarter of the year, as the coronavirus restrictions are lifted. Frydenberg predicts that Australia’s GDP will grow by 2.5% in 2021. This is based on the assumption that international borders would open from the 1st of January. So far, Australia has seen more than 13,000 infections within its country and 133 casualties from the COVID-19