Australia Enters Recession for the First Time in Almost 30 Years

Australia’s economy shrunk 7% in the second quarter of the year following a 0.3% shrink in the first quarter, thus Australia has officially entered its first recession since 1991.

The Australian Bureau of Statistics said it was the fastest quarterly contraction on record and ended three decades of economic growth that was able to resist the effects of the global financial crisis.

Michael Smedes, head of national accounts of the bureau, said the pandemic and containment efforts were to blame for the “unprecedented” drop that exceeded previous records “by a wide margin”.

Smedes added “The June quarter saw a significant contraction in household spending on services as households altered their behavior and restrictions were put in place to contain the spread of the coronavirus,”

The Australian government predicted a return to growth in the third quarter as virus restrictions eased, but the closure of non-essential businesses in Melbourne, the country’s second-biggest city, could hinder this prediction.

Authorities expect national unemployment to peak at 9.3% in December and the budget deficit to blow out to almost a tenth of GDP by mid-2021.