Australian economy heads to recession as consumers stop spending because of the coronavirus
The Australian economy has been plunged into disaster after a horror day on the sharemarket wiped a massive $137.1 billion off the value of the nation’s top 200 companies.
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The Australian economy has been plunged into disaster after a horror day on the sharemarket wiped a massive $137.1 billion off the value of the nation’s top 200 companies.
It fell by 7.3 per cent in its worst single-day demise since 2008 and has is down 19.6 per cent in just over two weeks.
Coupled with falling interest rates both in Australia and globally and strong predictions a recession is looming, the Morrison Government is now considering cash handouts similar to what former prime minister Kevin Rudd did back in 2009 at the height of the global financial crisis.
The stimulus package could be worth up to $10 billion and is an emergency move by the Federal Government to minimise the economic damage from rapid spread of the deadly coronavirus.
Treasurer Josh Frydenberg on Monday said the fallout from coronavirus was “very significant”.
“We’ve seen disruptions to international supply chains, we’ve seen a hit on particular sectors including the tourism sector, agriculture sector, seafood sector and education sector,” he said.
AMP Capital chief economist Dr Shane Oliver said coronavirus was “causing mayhem with the global economy which has caused nervousness for investors and pushed the sharemarket down”.
“People are feeling a loss of wealth and when there's a loss of wealth you spend less, investment in the sharemarket is 20 per cent lower than it was a few weeks ago,” he said.
“It’s warning us that coronavirus poses a significant threat to the economy and that raises risks in terms of things like retail sales, demand for sales, job, wages growth and tourism and our commodities has taken a hit.”
The Australian Retailers Association’s executive director Russell Zimmerman said “once people see their assets being eaten away they worry about the future and rightly so”.
“Our big concern is this will translate to even worse spending in the retail industry and that’s not what we need at the moment,” he said.
“We need people to spend money.”
REA Group’s chief economist Nerida Conisbee said the troubled economy was likely to impact the property market which had escaped being hit to date.
“Right now we are not seeing as much of an impact and we had a good weekend of clearance rates,” she said.
“If we go into recession and things get really bad the impact on pricing will be negative.
“What we know is the worst thing for property is job losses and with rising unemployment that could be a real negative on pricing.”
Global oil prices fell 10 per cent on Friday and another 26 per cent on Monday.
There’s now expectations petrol may hit as low as $1 a litre, which would help ease the burden on household’s hip pockets.
Originally published as Australian economy heads to recession as consumers stop spending because of the coronavirus