A go-slow on spending sent the economy backwards 0.3% in the first three months of this year, only the fourth such decline since Australia was last in recession in the early 1990s.

Treasurer Josh Frydenberg says Treasury has told him the next three months, the June quarter that we are in at present, will see a “far more severe” contraction, one private sector forecasters believe could be as high as 10%.

Asked whether that meant Australia was already in recession, he said it did.

Quarterly GDP growth since 1990

image ABS 5206.0 Most unusually for an economic downturn, incomes rose throughout the quarter, pushed higher by a 6.2% increase in government payments related to COVID-19 and the bushfires, and an 11.1% increase in insurance payouts as a result of bushfires and hailstorms. Household incomes even rose in per capita terms, by 0.1% after abstracting for population growth. But rather than spend more, Australian households dramatically increased saving in the quarter, pushing the household saving ratio up from 3.5% to 5.5% and pushing down household spending 0.2%. Household savings ratio image Commonwealth Treasury Spending on goods actually increased over the three months as Australians stocked up on essentials including toilet paper in March. The production of “petroleum, coal, chemical and rubber products” surged 8.1% as consumers stocked up on cleaning and disinfectant products. But spending on services plummeted, led down by dramatic falls in spending on transport and hotels, cafes and restaurants. Household consumption, March quarter image Commonwealth Treasury Spending on transport services (airlines and the like) fell 12.0%. Spending on hotels, cafes and restaurants fell 9.2%, each the biggest fall on record. “Production” in these industries fell 4.9% and 7.5%. Profits fell 6.8% and 14.2%. Spending fell on ten of the 17 consumption categories. Household consumption by category, March quarter image Commonwealth Treasury Most of the changes took place at the very end of the March quarter. A new index of the “stringency” of COVID-19 containment measures released with the national accounts shows these ramped up only in the final two weeks. Most have been in place for the entirety of the June quarter to date, suggesting the impacts on spending and production will be a “lot more substantial”, in the words the treasurer used in the national accounts press conference. ABS stringency of containment measures index image ABS 5206.0 Were it not for government spending, which has climbed 6.2% throughout the year, the plunge in March-quarter GDP would have been much more severe. Calculations of the Bureau of Statistics suggest it would have been twice as severe, a March quarter decline of 0.6% rather than 0.3%. General government expenditure image Commonwealth Treasury The treasurer described Australia as “on the edge of the cliff” in the March quarter, facing “an economist’s version of Armageddon”. The treasury had been contemplating a fall in gross domestic product of 20% in the June quarter. Australia has avoided that fate by acting on health and the economy early. Its fall in GDP of 0.3% in the March quarter was one-third the OECD average. International comparisons, real GDP growth, March quarter image Commonwealth Treasury The treasurer has scheduled an economic update for July 23 which will include the result of a review of the JobKeeper program. Asked whether it could be referred to as a mini-budget, he said it could be. Read more: Our needlessly precise definition of a recession is causing us needless trouble

Authors: The Conversation

Read more https://theconversation.com/the-economy-in-7-graphs-how-a-tightening-of-wallets-pushed-australia-into-recession-139960

Tips for choosing the best crypto trading platform

Crypto trading platforms are increasing at a faster pace with the increase in demand for crypto trading. These platforms are the best place for one to buy the digital currency...

How a peace conference's failures a century ago set the stage for today's anti-racist uprisings

On May 27, 1919, British Prime Minister Lloyd George, Italian President Vittorio Orlando, French Prime Minister Georges Clemenceau and American President Woodrow Wilson met May 27, 1919, during the Pa...

Elizabeth Thompson, Professor and Mohamed S. Farsi Chair of Islamic Peace, American University School of International Service - avatar Elizabeth Thompson, Professor and Mohamed S. Farsi Chair of Islamic Peace, American University School of International Service

Obamacare's unexpected bonus: How the Affordable Care Act is helping middle-aged Americans during the pandemic

President Barack Obama championed the Affordable Care Act, enacted into law during his administration in 2010. Getty Images / Chip SomodevillaTen years after the passage of the Affordable Care Act, th...

Marc Cohen, Clinical Professor of Gerontology and Co-Director of the LeadingAge LTSS Center @UMass Boston, University of Massachusetts Boston - avatar Marc Cohen, Clinical Professor of Gerontology and Co-Director of the LeadingAge LTSS Center @UMass Boston, University of Massachusetts Boston

If you're thinking of leaving a violent partner, you need a financial plan. This toolkit can help

ShutterstockThe COVID-19 pandemic has driven a surge of calls to domestic violence support services, as survivors of violence spend more time at home with their abusers due to lockdowns and other rest...

The Conversation - avatar The Conversation

Endangered Species Around the World

Have you ever wondered how so many species have become endangered? Currently 27% of all assessed species are threatened with extinction. That’s 31,000 in numbers. This is mainly due to habitat lo...

Timi B. Smith - avatar Timi B. Smith

How to Get Your Car in Better Shape Ahead of a Road Trip

For very obvious reasons, most of us are currently living in a reality where our travel options are much more limited than they used to be. However, there are still great ways to get out there and h...

News Company - avatar News Company