Australia Experience First Recession In Three Decades Due To The COVID-19 Pandemic

Illustration (Source: Wikimedia Commons)

JAKARTA - Australia is starting to feel the economic impact of the COVID-19 pandemic. The kangaroo country is facing its first recession in nearly three decades. The Australian Bureau of Statistics (ABS) said the country's Gross Domestic Product (GDP) contracted by 7 percent in the second quarter compared with the previous period.

The decline was the largest since 1959. Launching CNN, Wednesday, September 2, the Australian government explained that the recession was caused by the closure steps Australia was taking to contain the COVID-19 pandemic.

In the last quarter, the closure of hotels, restaurants and other services due to COVID-19 clearly hit the economy even more. Household consumption fell by more than 12 percent, while spending on services fell by nearly 18 percent.

"We have done everything possible to cushion the blow to the Australian community from COVID-19," said Australian Finance Minister Josh Frydenberg. "Our priority has been and will continue to save lives and ensure that the Australian health care system has the capacity to test and track and deal with COVID-19," he added.

In addition, previously Australia had faced the worst forest fire problem that had an impact on its economy. The disaster at least hampered consumer spending and tourism, according to the Australian Tourism Export Council.

Still blurry

The Reserve Bank of Australia said the pace of recovery after the last quarter was uncertain, depending on how long the COVID-19 outbreak continues. The state of Victoria - Australia's second most populous and home to the city of Melbourne - is now experiencing the hardest activity restrictions Australians have felt through the pandemic. The restrictions were put in place after the second wave of COVID-19 arrived in a brutal manner.

"This is something that will weigh heavily on the September quarter figures," said Australian Finance Minister Frydenberg.

The recession will continue to pressure the Reserve Bank of Australia to consider additional steps to keep the economy afloat, according to Marcel Thieliant, senior Australia and New Zealand economist for Capital Economics. The central bank has lowered cash rates to an all-time low to help businesses and households weather the downturn.

The COVID-19 pandemic has paralyzed many world powers. All of the top developed economies such as Canada, France, Germany, Italy, Japan, Great Britain and the United States have experienced dramatic economic shrinkage in the first half of 2020.