Australia’s economy contracted by the most on record last quarter, underscoring the need for unprecedented stimulus measures as the recovery from the nation’s first recession in almost 30 years is buffeted by Victoria state’s renewed Covid outbreak and lockdown.
Gross domestic product plunged 7% from the first three months of the year, the largest fall since records dating back to 1959, the statistics bureau said in Sydney Wednesday. The slump was larger than economist forecasts of a 6% drop. From a year earlier, GDP tumbled 6.3% versus an estimated 5.1% fall.
The Australian dollar fell after the report, and was trading at 73.52 U.S. cents at 1:02 p.m. in Sydney.
Australia’s early lifting of restrictions and reopening of its economy is now being offset by an almost two-month lockdown in Melbourne, the nation’s second-largest city with about 5 million people. That’s delaying the economy’s recovery.
“While the drop in GDP last quarter wasn’t much larger than the RBA had anticipated, it will keep the pressure on the bank to announce more stimulus,” said Marcel Thieliant, senior economist for Australia at Capital Economics.
The Reserve Bank of Australia on Tuesday expanded a lending facility for banks to A$200 billion ($147 billion) to help keep interest rates low for borrowers and keep credit flowing. Governor Philip Lowe also said that the board “continues to consider how further monetary measures could support the recovery.”
The central bank and government are working in tandem to try to support the economy. The former has kept its cash rate near zero and set a target of 0.25% on the three-year government bond yield, and the latter is extending its labor market assistance package.
Bloomberg
