Coronavirus: Brace for the worst GDP fall on record

Economists are predicting the largest quarterly drop in GDP on record over the coming three months.

JPMorgan economist Ben Jarman said the partial shutdown of large sections of the economy would lead to a 10 per cent collapse in GDP through the June quarter.

Economists are predicting the largest quarterly drop in GDP on record over the coming three months, as increasingly draconian measures to control the spread of the coronavirus drive a “depression-like” contraction and the jobless rate to as high as 11 per cent.

New government-mandated restrictions on “non-essential services” have led to the closures of pubs, clubs, gyms, cinemas and ­casinos, while restaurants and cafes have been restricted to takeaway service only.

All states and territories aside from NSW, Victoria and the ACT have closed borders to non-essential travel.

A day after a skeleton sitting of parliament passed $85bn in stimulus measures designed to support households and businesses, and as long queues formed outside social security offices across the nation, JPMorgan economist Ben Jarman said the partial shutdown of large sections of the economy would lead to a 10 per cent collapse in GDP through the June quarter. That would be the largest decline since quarterly national accounts reporting began in 1959. The previous largest fall in quarterly GDP was 2 per cent in 1974.

Mr Jarman said unemployment would jump as high as 11 per cent in the coming months and, without factoring in an expected fall in the participation rate, the jobless measure would be reaching 16 per cent.

Westpac chief economist Bill Evans said he also expected the jobless measure to reach 11 per cent during the coming three months, as more than 800,000 Australians lose their jobs. He estimated a less severe 3.5 per cent fall in GDP in the June quarter.

“For now, we anticipate that the shutdowns will essentially cease by the December quarter, with only a gradual relaxation during the September quarter,” Mr Evans said.

As the escalating costs of ­containing the virus become clearer, NAB head of currency strategy Ray Attrill said it was ­“realistic” to say the economy was entering into a “depression-like contraction”.

But Mr Attrill also expressed hope this would be the shortest depression in history because of the policy support that was being provided and “making the heroic assumption that these containment efforts will ultimately prove successful”.

Scott Morrison has flagged further spending measures in coming days or weeks.

Westpac economists said the tens of billions of dollars thrown at cushioning the impact of the pandemic would turn what was expected to be a skinny surplus mere weeks ago into a $90bn deficit. That would widen to $160bn in the next financial year, they said.

As households fear job losses and amid a glut of terrifying news related to the virus, ANZ’s weekly consumer confidence index plunged 28 per cent to a level below where it registered in the depths of the global financial crisis.

It was the biggest fall since the index shifted from monthly to weekly in 2008.