Australia is set to release its worst set of economic growth figures in at least 60 years and confirm it has suffered the first recession since the early 1990s.
Economists expect the national accounts for the June quarter on Wednesday will show a large economic contraction of around six per cent.
This is the result of the enforced restrictions on the community in attempting to suppress the coronavirus pandemic.
It will follow the more modest 0.3 per cent decline in gross domestic product in the March quarter when COVID-19 first hit Australia’s shores and confirm a technical recession of two consecutive negative quarters.
Treasurer Josh Frydenberg told parliament on Tuesday the contraction won’t be as bad as seen in other countries “indicating the remarkable resilience of the Australian economy”.
Even so, the downturn has already seen the number of people unemployed increase to more than one million for the first time.
Treasury has also warned a further 400,000 Australians could join the dole queue before Christmas, partly as a result of Victoria’s harsh lockdown.
The June quarter result is expected to include a collapse in household consumption, weak building construction and a slump in business investment and inventories.
On the plus side, exports will make a strong contribution, as will government spending.
RBC Capital Markets head of strategy Su-Lin Ong said the national accounts for the June quarter would more backward looking than usual given the ever-fluid dynamics of the COVID-19 pandemic.
But they would provide the starting point to assess just how much output needed to be recovered after the “demand destruction” of the June quarter, she said.
Some economists are concerned the September quarter could produce a third negative result due to the lockdown in Victoria, given the state accounts for about a quarter of national output.
But at this stage ANZ senior economist Felicity Emmett expects the economy will expand modestly, with the re-opening of businesses in other states offsetting a further contraction in activity in Victoria.
However, she says the December quarter will prove challenging with a sharp drop off in fiscal stimulus scheduled to occur.
“We expect though that the government will be keen to avoid a negative quarter, and anticipate a boost in stimulus measures in the October budget,” she said.
She said that would help to support growth in both the December quarter and over the medium term.