The March quarter National Accounts released by the ABS today suggest Australia will have two consecutive quarters of negative economic growth in the first half of 2020, and hence the traditional definition of a recession will be satisfied. That said, it’s never been in doubt that we’re effectively in a recession as a result of COVID-19 mitigation measures.

According to the ABS, national GDP contracted 0.3% in the March quarter. Queensland’s State Final Demand (i.e. demand from domestic sources and excluding exports) fell 0.3%, NSW’s fell 1.5%, and Victoria’s fell 0.1% (see chart below). The falls in June quarter will be much larger than these reported falls for March quarter.

Incidentally, on the west coast, an increase in mining capital investment boosted WA State Final Demand by 0.9%. ACT and Tasmania also saw increases in State Final Demand, so check out the ABS’s useful commentary on the SFD estimates if you’re interested in learning more.

The March quarter GDP contraction was largely related to households cutting their consumption spending and businesses cutting their capital investment spending across Australia, although in Queensland, surprisingly, a decline in government capital spending contributed to the contraction in our State Final Demand (see figure below). The ABS observed for Queensland that: “Public gross fixed capital formation decreased 2.5%, driven by a: 3.1% decrease in general government investment in buildings and state and local investment in infrastructure”.

Time will tell how long and deep the recession will be. In Queensland, thankfully the state government has now relaxed many restrictions and we can now travel freely within Queensland. Ideally, we’d also open the border with NSW, given there no longer appears to be a compelling public health reason to keep it closed.

On the border issue, check out my interview with Joe Branigan.