SYDNEY — Australia is headed toward its first recession in 29 years as aggressive measures against the new coronavirus deal a heavy blow to economic activity and employment.
Gross domestic product is seen shrinking in real terms for the January-March quarter, with UBS economist George Tharenou predicting a 1.4% quarter-to-quarter decline.
GDP grew 0.5% on the quarter in the final three months of 2019. But widespread bush fires have seriously hurt such sectors as tourism, and the pandemic has only made matters worse.
Most expect a second quarter of contraction in the April-June period, officially qualifying as a recession. Some predict a drop of as much as 10%, with government efforts to curb the outbreak squeezing economic activity.
Movie theaters, gyms and pubs have been shut down nationwide since March 23, and restaurants are limited to takeout and deliveries. Airlines and tourist-related businesses are also hurting from the entry ban on nonresidents and noncitizens. Applications for unemployment benefits have surged.
The authorities are working to ease the pain. The Australian government and the Reserve Bank of Australia have announced 320 billion Australian dollars ($196 billion) worth of stimulus measures since mid-March. The measures, which equal roughly 16% of GDP, include a wage subsidy to businesses and a A$550 handout every other week to low-income individuals.
Australia has not suffered a recession since 1991 and holds the world record for longest uninterrupted economic growth. It continued to grow through the global financial crisis of 2008, thanks to massive stimulus measures in China that underpinned demand for such Australian commodities as coal. An influx of Chinese investment has since fueled higher housing prices, with real estate and financial services underpinning the economy until now.