Australia has had one hell of a year. The country has already suffered through devastating bushfires, flooding, and a pandemic – and it’s only June. Given that, it will come as no surprise Treasurer Josh Frydenberg just announced Australia has officially entered a recession.
When asked whether the country had fallen into recession today, Frydenberg said, “The answer to that is yes. And that is on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be.”
But what does that mean? And more specifically, what does it mean for your wallet?
This week, the Australian Bureau of Statistics released figures that show the economy shrank 0.3% in the March quarter amid the bushfire crisis and early impacts of the pandemic.
A recession is commonly defined by two consecutive quarters of decline, and according to Frydenberg, the June quarter is set to be “far more severe than we have seen today” – reflecting the full impact of COVID-19 shutdowns.
Hear about life after lockdown below:
Back in March, Dr. Andrew Grant, a senior lecturer at the University of Sydney Business School told News.com.au, a recession would make it harder to change jobs, and that there would be lower growth in wages.
When it comes to small business owners, Dr. Grant said “even if there are extensions to loans or deferred payments,” keeping the lights on for less customers may not be viable.
He said having an ‘emergency fund’ of savings could become crucial in a recession, as well as cutting back on unnecessary spending – rather investing in personal development and new skills if the job market worsens.
The good news is, Frydenberg says our economic state could be a lot worse.
“Treasury were contemplating a fall in GDP (Gross Domestic Product) of more than 20% in the June quarter. This was the economists’ version of Armageddon,” he told reporters.
He said Australia’s performance compares “very well” to that of China, France, Germany, the UK and US.
There’s also light at the end of the tunnel. The continued easing of coronavirus restrictions means we’ll start returning to our usual spending habits, and businesses can slowly wean off JobKeeper.
Once we make it through the government’s three-step framework for lifting restrictions, the treasury project $1.4B will be delivered to the economy. However, that may not be until the end of July. Until then, start saving your pennies – future you will be thankful.
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