COVID-19 recession: It’s not bad at all when you look at the rest of the world

Despite a historic contraction in GDP that has tipped Australia into recession, the economy has performed far better than almost all others around the world.

Despite a historic contraction in GDP that has tipped Australia into recession, the economy has performed far better than almost all others around the world, partly because of China’s demand for our resource exports.

The 7 per cent drop in GDP in the second quarter of the year is among the smallest contractions of the 52 nations that have so far released comparable figures, according to analysis provided by independent economist Saul Eslake.

The economies of India, Spain, and the UK each contracted by more than 20 per cent in the second quarter, for instance, while the US and Canadian economies contracted 9.1 per cent and 13 per cent, respectively.

“Australia’s economic performance sits among the top when compared with other nations, as a result of our health and economic plan to fight the virus,” Josh Frydenberg said on Wednesday.

“This should not be lost on any Australian. We have performed better in the most difficult circumstances than all these other developed nations,” he added.

Sweden, Taiwan and Japan, which didn’t enforce mandatory lockdowns, endured GDP contractions of 8.6 per cent, 0.7 per cent and 10 per cent, respectively.

Mr Eslake said Australia’s relatively good performance rested in part on our success in containing the coronavirus. “Second, the ­government has done a lot. We had room to do more than other countries fiscally, as we did going into the GFC, and we used it again,” Mr Eslake said.

“And third, the relationship with China has continued to shower us with benefits,” he added, contrasting Australia with Canada’s economy, whose chief exports, oil and gas, had seen their prices fall during the pandemic.

The price of iron ore, Australia’s most valuable export, has soared to well above $US110 a tonne, around double the level ­assumed in the federal budget.

Stephen Koukoulas, an economist at TD Securities, said one quarter of economic growth wasn’t a long enough period to make valid comparisons. “You would need at least 18 months and must reference the labour market to make it meaningful,” he said.

Vietnam, Georgia and China were the only countries to see their economies grow in the second quarter.

The ABS said household spending, which slumped 12 per cent in Australia in the quarter, had fallen significantly across a range of developed countries.

“Uniquely among this group of countries, Australia saw an increase in spending on durable goods, as home improvement projects, gardening activity and home offices drove the large increases in spending on household tools and appliances,” the ABS said.

“The largest falls were seen in the consumption of services.”