Covid-19 will end Australia’s 28 years of unbroken growth

Mar 19, 2020

THE BUSHFIRES that raged through December and January could not stop it. Nor could a recent fall in house prices, a slump in iron-ore prices in 2014, the global financial crisis or the dotcom bust of 2001. But covid-19 seems likely to do what none of these other setbacks could: interrupt Australia’s unbeaten run of over 28 years without a recession.

It is no longer a “question of whether we have two successive quarters of negative growth,” says Warren Hogan of the University of Technology Sydney, “but how severe the contraction turns out to be.” The first half of the year is “going to be bad”, agrees Sarah Hunter of BIS Oxford Economics, a consultancy. Output could shrink by a little in the first quarter of this year and by about 3% in the second, according to her provisional forecasts, which she expects to have to revise as the outlook becomes clearer, if not necessarily brighter. In theory, the economy could rebound in the second half of the year, but only if the pandemic is quelled in the next 3-6 months.

Australia will not succumb to a recession without a fight. Its central bank, the Reserve Bank of Australia (RBA), helped it survive the global financial crisis by easing monetary policy sharply. But it entered that battle with its benchmark interest rate at 7.25%, leaving it plenty of room to cut. The RBA started...

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