He said no matter Wednesday’s results, the economy was already in a “manufactured” recession.
“The government, RBA and most in the media have refrained from using the ‘R‑word’ to date to describe what is currently happening in the economy. That will be inescapable … if the ABS throws up a negative number,” he said.
Both Citi and AMP, who previously forecast a 0.1 per cent contraction over the quarter, are now predicting an increase of 0.5 per cent and 0.3 per cent respectively on the back of stronger than expected net exports data.
Capital Economics and Westpac expect 0.1 per cent growth in the June quarter, while Barclays upgraded expectations from 0.2 per cent to 0.5 per cent. ANZ remained at 0.4 per cent.
Data on Tuesday showed a drop in the size of Australia’s trade surplus, which will cut economic growth by a full percentage point. But there was a sharp lift in government capital spending over the same period, boosting growth and employment.
BIS Oxford Economics chief Australia economist Sarah Hunter said the GDP result will be “much softer” than the 1.8 per cent rebound recorded in the first quarter of the year as lockdowns came to an end.
“The extended lockdowns in NSW, Canberra and Victoria are clearly putting a significant drag on the economy – around 60 per cent of the population are currently in lockdown – which will be recorded in the September quarter data,” Ms Hunter said.
“The economy is likely to contract by well over 3 per cent, but with vaccination rates rising sharply, particularly in NSW and Victoria, state governments are flagging easing restrictions from mid-fourth quarter onwards, which will allow the economic recovery to begin before the end of the year.”
AMP Capital chief economist Shane Oliver said the current quarter is likely to show a 4 per cent decline in GDP due to the lockdowns, but a bounce back driven by reopening in the December quarter would help avoid a second recession.
“Not that it makes much difference of course for many businesses and workers hit by the lockdowns for whom it would feel like a recession anyway,” Dr Oliver said.
Labor shadow Treasurer Jim Chalmers said there wouldn’t be a first-rate economic recovery without a strong vaccine roll out.
“And unfortunately, no matter what the numbers say tomorrow, that’s what we’re seeing in the Australian economy,” he said.