Businesses fear economy already in recession

Businesses across the nation have declared the economy in recession for the first time in almost 30 years.

The benefit of cheap fuel caused by the oil price war can soften the impact of the COVID-19 related economic slowdown.

Businesses across the nation have declared the economy in recession for the first time in almost 30 years, as the death toll from the deadly coronavirus reaches five and infections soar above 400.

Almost 60 per cent of more than 600 Australian businesses surveyed by Roy Morgan said the economy was in “recession” already, including almost 70 per cent in Queensland - more than any other state - whose tourism sector is expected to be hit especially hard by the collapse of international travel.

“Some industries have been hit harder than others, but majorities of businesses in most industries agree Australia is in a ‘recession’ including Manufacturing, Construction, Wholesale trade, Accommodation & Food services and Education & Training,” said Roy Morgan chief executive Michele Levine.

“Although it’s obvious Australia is already in a ‘recession’ there are only a few things that can save Australia from experiencing a full-blown ‘depression’ which is recognised as a fall in GDP of at least 10 per cent,” she added.

The last recession in Australia in the early 1990s saw the jobless rate surge from 6.6 per cent to 9.5 per cent in the 12 months to 1991.

The domestic death toll from the virus that has infected more than 180,000 people globally, reached five early on Tuesday amid warnings that 150,000 could perish in Australia – more than 10 times the number that died in Australia from Spanish flu earlier this century.

Businesses in the three biggest states by population were most concerned, the survey found.

“Over two-thirds of businesses in Queensland (68 per cent) and majorities in NSW (56 per cent) and Victoria (51 per cent) agree Australia is in a ‘recession’,” Roy Morgan said.

A recession is typically defined as six months of economic contraction.

The survey follows a separate survey of businesses by Roy Morgan over the weekend that found 60 per cent said they had been affected by the coronavirus, up from 15 per cent four weeks ago. Around 80 per cent of small businesses with turnover between $1m and $5m said they were affected, more than large firms (73 per cent).

The federal government is expected to announce a second stimulus package in coming days, following concerns the size of its $17.6bn stimulus package announced last week – including handouts for pensioners and tax rebates for small businesses - wouldn’t go far enough to stem job losses.

The Reserve Bank of Australia has said it would reveal further measures to stimulate the economy on Thursday, widely expected to include a cut in the official interest rate to 0.25 per cent and announcement of quantitative easing.

“The combination of continued high export earnings bringing dollars into the Australian economy and the benefit of cheap fuel caused by the oil price war can soften the impact of the COVID-19 related economic slowdown – helped a lot by the price of petrol dropping significantly,” Ms Levine said.