This Wednesday, Australia became another country to officially enter a recession. The coronavirus pandemic continued to affect the economies around the world and the local economy is not an exception.
As a result, the country’s economy fell into its first recession in nearly 30 years. Importantly, gross domestic product (GDP) shrank 7% in the April-to-June quarter compared with the previous quarter.
Notably, this is the biggest fall since records began more than 50 years ago in 1969. In the first quarter, the GDP fell by 0.3%. People should take into account that, an economy is considered to be in recession if it sees two consecutive quarters of negative growth.
Interestingly, Australia was the only major economy to avoid a recession during the 2008 global financial crisis, mainly thanks to demand from China for its natural resources.
At the start of 2020, the economy was affected by falling economic growth due to an extreme bush fire season. Moreover, the early stages of the coronavirus pandemic also created problems. This is not the end of the story, as more recently the shutdowns of businesses across the country caused problems for the companies. The country’s government as well as the central bank took measures to support the economy. However, those measures proved insufficient to avert a recession.
Notably, this is the worst economic growth in 61 years, due to a huge contraction in household spending on goods and services.
This year will go down in records as one of the worst periods of time for the country. Bushfires ravaged through more than 12 million hectares. As a result, thousands of small companies lost months of essential tourism revenue.
Local economy and main challenges
As mentioned above, the local economy fell into its first recession in nearly 30 years. However, bushfires as well as the coronavirus pandemic affected a once-thriving country.
The country’s government implemented strict social distancing rules and closed its borders. Consequently, 1 million people lost their jobs. Australia’s economy was growing for decades thanks to strong coal, iron ore, and natural gas imports to China. Moreover, tourism helped to boost the economy.
However, apart from bushfires and coronavirus pandemic, there is another problem as well. This problem is the country’s tense relationship with China. The world’s second-largest economy is the biggest trading partner of Australia.
Nevertheless, the country strongly supported a global inquiry into the origins of the coronavirus in April. This decision infuriated the Chinese government. As a result, relations between the countries deteriorated and the Australian economy suffered losses due to the situation.
It is worth noting that, the country’s government has already allocated $147 billion to boost the economy. Interestingly, Australia reached better results when it comes to controlling the virus. Moreover, the economy sustained less damage than in other countries.
However, it won’t be easy to solve all the problems created by the pandemic. Last time, Australia fell into recession in mid-1990 which ran into late 1991. Notably, despite all problems, the country is doing better than most other advanced economies. For example, the U.S. economy shrank 9.5% in the second quarter of the year.
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