GDP contracted by 7.0 per cent in June – the largest quarterly fall since records began in 1959. The biggest drag came in the form of household spending, which fell 12.7 per cent over the quarter and detracted 6.7 per cent from GDP.
But Treasurer Frydenberg stressed that the situation wasn’t as dire as it seemed.
“While these numbers are extremely sobering and devastating, back in May we had expected them to be even worse,” Mr Frydenberg told media, adding that in March Treasury had contemplated a collapse in GDP of over 20 per cent.
Consumer confidence has now increased over nine consecutive weeks, recovering 70 per cent of its fall, while business confidence has recovered nearly 80 per cent of its fall. Of the 1.3 million people who lost their job or had their hours reduced to zero, more than half were back at work in July.
“This gives us confidence that as a nation we are better placed than most other nations, and by that containing the virus we can chart a pathway to economic recovery and leave the worst of the economic crisis in the June quarter behind us,” Mr Frydenberg said.
Australia has performed substantially better than a number of other advanced economies – including Japan, Sweden, and the US – with better virus control, massive stimulus spending and demand from China carrying us through the worst of the contraction.
But we’re not quite out of the woods.
“The road ahead will be long. The road ahead will be hard. The road ahead will be bumpy,” Mr Frydenberg said.
“But it’s important to recognise that this fall in the June quarter does not include the impact from the stage four restrictions imposed by the Victorian government in early August. This is something that will weigh heavily on the September quarter numbers.”
The Treasurer expects that those lockdowns will cost the economy $10 billion to $12 billion, with the September quarter to be flat or slightly negative, but remains optimistic about the recovery.
“There is hope, and there is a road out,” Treasurer Frydenberg said.
“Our plan for the recovery has seen hundreds of thousands of Australians get back to work. And thousands of Australians open their doors. Our commitment to the Australian people is that we have your back. We were with you on the way into this crisis, we are with you through this crisis, and we will be with you all the way out of this crisis.”
