The release of the Q1 GDP data by the ABS this morning confirms what anyone already knows…Australia is in recession. Although we will not get the official numbers for the second quarter for another three months, it is clear that a three month shut-down from March will inevitably mean a significant hit to GDP in that quarter.
Our own expectations for Q1 had been for a decline in the region of 0.1-0.2%, while there were some still holding onto the hope that it would come in (very marginally) positive and therefore, at least on the technical definition, continue Australia’s enviable run of avoiding recessions. Such hopes were dashed and in reality any claims that Australia wasn’t in recession would have been meaningless anyway given the economic damage done so far this year.
Q1 GDP fell 0.3% q/q for a year-on-year rate of just 1.4% (down from 2.2% previously). Household consumption (the largest single component in GDP) fell 1.1% for the quarter and subtracted 0.6 ppts from GDP.
The Conus model is suggesting that the second quarter could see another 8.7% q/q decline in the second quarter with GDP contracting 5.3% for 2020.
In Queensland the domestic side of the economy contracted by 0.3% q/q for a year-on-year rate of growth of just 0.6% (down from 1.4% in Q4). The latest QLD Treasury estimates for Gross State Product (which includes the external sector of the state’s economy) in Q4 2019 were released a few days ago and showed a 1.2% q/q increase which equates to a 3.8% y/y growth. Today’s numbers are likely to be reflected in a negative result for GSP when we finally see that data in three months time.
Our own model is suggesting the decline in Queensland’s Q1 GSP could be as sharp as 1.4-1.5% q/q which would be followed by a fall of 6.8% in Q2; that would see GSP down 6.0% for 2020.