Australia GDP in Q2 worse than its performance in 2020; Chief economist worried about ‘manufactured recession’

The economic slowdown in Australia has been further aggravated by the long term and wide-scale Covid-19 restrictions and lockdowns. The effects of the lockdown phase have been so atrocious that businesses and jobs are set to witness an irrevocable and shattering contraction in this quarter. Gareth Aird, CBA's head of Australian economics said that the economy was in a good shape till most of the time in June but the Delta variant ended all hopes of recovery.

The recent data on GDP was parallel with a bad market forecast. In the June quarter, the median call for growth was recorded at 0.5%. The market forecast ranged from a 0.1% fall to growth of 1.2% underlining the uncertainty of the age. The figures are disappointing if compared to the 1.8% in the March quarter and 3.2% figure in the final quarter of 2020. Aird said that Australia is going through a period of “manufactured recession”. 

Consumer spending and business investment were the two saving graces in this quarter. But that was offset against a flood of imports, as opposed to increase in production.  The annual growth is shockingly at an all time high of 9.2%, but only because this was preceded by a contraction of 7.0% that is currently off the books. 

The new set of lockdowns is tipped to slouch the economy of Sydney, Melbourne and Canberra. 

Economists said that GDP is at a risk to fall in the negative percentage points in Q2 and a sharp contraction is expected in Q3 pencilled in at around -3% q/q. Resurgence of economic activity can only take place after the lockdown is lifted. That possibility is weak as lockdown restrictions will most likely be extended all the way into October. 

The economic recovery looks uncertain even after government efforts of spending billions in disaster payments to businesses and workers, at the cost of borrowing.