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Australia in recession with first quarter of negative growth in nine years

Mr Frydenberg conceded the country is in recession “on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be”.

He said the next quarter figures will more fully reflect the coronavirus pandemic and associated shutdowns, which began in Australia in March.

“The economic impact will be severe. Far more severe than what we have seen today. That’s what Treasury’s advice to me is.”

In the March quarter household spending fell by 1.1 per cent but it was skewed by the summer’s fires and the pandemic.

Spending on essentials was up 0.6 per cent but expenditure on discretionary goods and services dropped by an out-sized 3.9 per cent.


Total business investment dropped by 0.4 per cent while capital spending by governments dropped by 0.7 per cent.

Net trade contributed 0.5 percentage points to the result, but was this largely due to a drop of 6.2 per cent in imports.

ABS chief economist Bruce Hockman said the economy had slowed sharply before the full impact of the coronavirus pandemic.

“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,” he said.


All of the nation’s major bank economists had been expecting a fall in GDP through the March quarter.

National Australia Bank forecast minus 0.1 per cent, ANZ predicted minus 0.2 per cent, Commonwealth Bank and AMP believed it would be minus 0.3 per cent while Westpac tipped minus 0.4 per cent.

The household saving ratio increased to 5.5 per cent, reflecting a lift in gross disposable income and a fall in consumption.

The increase in income was due to a 6.2 per cent jump in social assistance benefits such as JobSeeker and help to fire-affected communities.


Of the states and territories, NSW suffered the biggest hit during the quarter with state final demand down by 1.5 per cent.

Final demand also fell in Victoria (minus 0.1 per cent), South Australia (minus 1 per cent) and the Northern Territory (minus 1.2 per cent).

It lifted in Western Australia by 0.9 per cent, by 0.6 per cent in Queensland and by 2.1 per cent in the ACT.

The last time Australia’s national accounts showed a contraction in economic growth was in March 2011.

On that occasion, the original report from the bureau showed a 1.2 per cent drop, due largely to cyclones that disrupted mining production across Queensland and Western Australia. Over the years, that initial report has improved to a fall of 0.3 per cent.

It was followed by a 1.2 per cent jump in GDP in the June quarter.

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