(Australian Associated Press)
It’s not seen as likely but first-quarter economic growth figures set to be released on Wednesday will show if Australia has a chance of avoiding the technical definition of a recession.
Economists are predicting gross domestic product figures for the June quarter will show Australia suffering a massive economic contraction, perhaps as much as 10 per cent.
But the GDP figures for the three months to March 31 still might show Australia’s economy had grown in the period mostly before the COVID-19 lockdowns, economists say.
“It’s certainly possible,” said Sarah Hunter, chief economist for BIS Oxford Economics, who predicts a 0.5 per cent shrinkage.
“It’s not what I expect but it’s not impossible.”
A flat or positive result would give the lucky country a chance to keep alive its string of 29 years and counting without a recession, technically defined as two consecutive quarters of economic contraction.
Economic data released on Tuesday showed a mixed picture of several of the inputs that contribute to GDP.
Business inventories were weaker than expected, falling 1.2 per cent in the largest drop since 2014 the coronavirus crisis disrupted supply chains.
But Australia’s first-quarter trade surplus and government spending on infrastructure and health care was expected to contribute to economic growth.
Still, St George chief economist Besa Deda predicts a 0.4 per cent contraction.
“There is some chance (for a positive number) but there’s a greater chance is there will be a contraction,” she said.
“The economy has been hit by a huge shock so the backdrop is one in which there is less clarity than usual and greater variability attaches to forecasts,” she noted in a text message.
AMP chief economist Shane Oliver said the financial services company expected a 0.3 per cent contraction but agreed a positive read was possible.
“It would show Australia performing much better than other countries have,” he said.
But Australia also seemed to have navigated the coronavirus crisis more successfully than many other countries, he noted.
Even if Australia avoids the technical definition of a recession, “most people would see it as a recession of some sort”, Mr Oliver said.
Still a positive result would bolster markets, said Betashares chief economist David Bassanese, who said there was an “outside chance” it could happen.
Australia last was in recession in June 1991 and its string of uninterrupted economic growth is a record among developed countries.
The Australian Bureau of Statistics will release the GDP figures at 1130 AEDT on Wednesday.