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Analysts at Standard Chartered point out the coronavirus-enforced lockdown is set to cause the steepest downturn in Australian GDP growth in decades. They forecast a -5.1% 2020 growth y/y, down from the previous -0.8% estimation. 

Key Quotes: 

“We lower our 2020 growth forecast for Australia to -5.1% y/y (-0.8% y/y previously). This would be the worst contraction since at least 1960, when the current GDP series was first published. We expect Q2 to be the worst hit, on account of the lockdown measures in place since 21 March to facilitate social distancing; we expect GDP to contract over 12% y/y in Q2. We also lower our 2020 inflation forecast to 0.7% y/y (from 1.8% y/y) to account for slower activity and lower global crude oil prices.”

“Domestic consumption is likely to contract substantially due to the shutdown measures. While social distancing measures have ‘flattened the curve’ and contained the spread of coronavirus, domestic activity has taken a sharp hit.”

“Substantial fiscal and monetary support is likely to buffer the slowdown, but not prevent Australia’s first recession since 1991. Significant job losses on declining activity are likely to further weigh on sentiment and consumption. Government spending aimed at enabling businesses to retain workers should prevent a rapid rise in unemployment; nevertheless, we expect the unemployment rate to peak at c.11%.”