While economic output in Australia saw a significant contraction in March and April, minutes from the RBA’s June meeting suggest the current downturn could be “shallower than earlier expected.”
Australia’s relative success in containing the virus and the Federal Government’s multiple stimulus measures have been instrumental in protecting the economy from collapse, the minutes said.
“Households that were already receiving welfare payments had additional payments, and the JobKeeper program and increased JobSeeker payments had supported incomes for others. In some instances, households had received more income than usual.”
But there are still plenty of hurdles ahead, with the RBA warning that reduced consumer demand and appetite for investment could prolong the downturn.
Unemployment will also remain elevated for come time, though a consensus is emerging that the number of job losses won’t be as severe as initially expected.
“The contraction in spending in late March and April had been accompanied by significant job losses, with total hours worked falling by 9 per cent in April. Timelier payroll data suggested that the pace of job losses had slowed towards the end of April,” the minutes read.
“In some of the industries that had been most affected by the restrictions on activity, the number of jobs had stabilised or increased a little, suggesting that the total decline in hours worked may be less than had previously been feared.”
However, members noted that an unusual number of Australians who lost their job in April did not actively search for new work, obscuring the overall picture of unemployment.
What’s more, the share of workers who are still on their company’s payroll but working zero hours has also increased.
“While some of these workers were likely to have been supported through the JobKeeper program, others would have been stood down without pay and may have become unemployed since then,” the minutes read.
Australia faring better than most, but a second virus wave could deepen crisis
Though officially in the midst of a recession, the Australian economy has managed to avoid the pummeling others around the world have taken. Among major economies, only South Korea, China, Indonesia and India are faring better.
But a second wave of coronavirus infections could push Australia’s hopes for recovery even further back. According to an OECD report released last week, Australian GDP could fall by 6.3% over the year if another outbreak occurs.
"Should widespread contagion resume, with a return of lockdowns, confidence would suffer and cash flow would be strained," the report said.
While there’s some apprehension accompanying the lifting of restrictions, the OECD conceded the chances of a second outbreak were lower in Australia due to its geographic position and ongoing overseas travel bans.
Nonetheless, the global economic body urged the Government to consider extending policies like the JobKeeper payment beyond their September end date, saying there is “ample fiscal space” to continue the flow of support to households and businesses.
For more information about the assistance available to households and businesses, along with tips to keep your finances in good health amid the current crisis, browse our guide to coronavirus and your finances.