Australia enters a technical recession with biggest GDP contraction on record

• Australia has entered a technical recession after recording two consecutive quarters of economic contraction according to data released today from the Australian Bureau of Statistics
• The country’s Gross Domestic Product (GDP) contracted seven per cent in the June quarter, the biggest fall in GDP since records began 61 years ago
• This followed a 0.3 per cent reduction in GDP in the March quarter, encapsulating just the beginning of the COVID-19 pandemic
• During the June period, the largest slump in consumption came from the tightening of household belts, with more than one million people out of work
• The market was unperturbed by the backwards-looking data which confirmed expectations of a technical recession and the ASX 200 finished today’s session 1.84 per cent higher

Australia has entered a technical recession and experienced its steepest fall in Gross Domestic Product (GDP) on record.

Data released today by the Australian Bureau of Statistics (ABS) shows Australia’s GDP contracted seven per cent in the June quarter, the biggest fall since records began 61 years ago.

This followed a 0.3 per cent reduction in GDP in the March quarter, meaning Australia has now entered a technical recession, defined as two consecutive quarters of negative GDP.

During the June period, by far the largest slump in consumption came from households tightening their belts.

ABS Head of National Accounts Michael Smedes said this contraction could in part be attributed to altered day-to-day activities due to pandemic restrictions.

“The June quarter saw a significant contraction in household spending on services as households altered their behaviour and restrictions were put in place to contain the spread of the coronavirus.”

More than one million Australians are out of work, with the July Labour Force data from the ABS revealing an increase in the unemployment rate to 7.5 per cent. Underemployment was also significant at 11.2 per cent.

Government expenditure on support measures and stimulus ate away at savings, and over the June quarter net government savings fell from $1.2 million to an $82.6 million deficit.

The market was unperturbed by the retrospective data released today which confirmed expectations of a technical recession. By the end of the session, the ASX 200 index was up 1.84 per cent at 6063.2 points.