Negative Growth Projected as Consumer Confidence Drops in “Once in a Century” Event
Consumer confidence has taken a massive hit as the pandemic continues to erode at the fastest rate in nearly five decades.
The data comes from a collaborative survey from the Melbourne Institute and Westpac bank, which painted a bleak 18% drop in consumer confidence for the month of April. Westpac’s chief economist, Bill Evans said that the data is “very disturbing and reflects the large shocks to jobs and spending, in the aftermath of the coronavirus.
The ‘time to buy a dwelling’ index dropped accordingly, too, with a 26.6% drop for the month, with Westpac’s chief economist saying this was one of the “most surprising” findings of the study. Evans said that “while this measure has a much shorter survey history, the fall is nearly four times bigger than the largest monthly decline since we started running the question regularly in 2009.”
Westpac anticipates that Australia will suffer three consecutive quarters of negative growth before bucking the trend.
“The survey comes after an extremely turbulent month in which the coronavirus outbreak has evolved to nearly two million currently. In Australia, the number of cases has surged from 76 a month ago to around 6500.”
The same survey, however, praised the Morrison government’s decision to implement a number of stimulus packages into the Australian economy, revising its unemployment figures for the half-year mark from 17% down to 9%, in part due to the JobKeeper package that was passed.
“Markets are currently buoyed by government’s stimulus packages,” Bill Evans said. “But as we move through the June quarter and stimulus packages fade into the background, the economic damage and the pessimism around the virus will dominate markets.”
“Prospects are now for a deep recession in 2020, without output to contract in March (-0.7%), June (-8.5%) and September (0.6%,” Evans said, anticipating a sharp rise in the December quarter of around 5%, bringing the year’s estimated losses to 5% for the year of 2020.
According to News.com.au’s reporting, “Australia’s economy is tipped to suffer the heaviest fiscal blow of the Asia Pacific region, forecast to lose 6.7 per cent in 2020 before beginning a pronounced recovery while global growth is expected to drop 3 per cent.”
The International Monetary Fund’s chief economist, Gita Gopinath wrote that “this is a truly global crisis as no country is spared. In the April World Economic Outlook we project global growth in 2020 to fall to -3 per cent.”
“This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.”
She did, however, state that if the virus fades in the second-half of 2020 and government responses remain “swift and sizable”, global growth would rebound to 5.8% in 2021.
“A partial recovery is projected for 2021, with above-trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely,” she warned.
“This would follow if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment.”