How bad is Australia’s Coronavirus recession going to be?

We all know Australia is going into recession, but how bad will it be and how long will it last?

The International Monetary Fund has forecast that the Australian economy will contract by 6.7 per cent in 2020 due to the coronavirus lockdown.

However, the IMF expects the domestic economy to rebound by 6.1 per cent in 2021, assuming that measures to contain the virus are successful.

 

Growth Forcasts

Source: The Australian

The IMF’s outlook also forecasts that global GDP growth will fall by three per cent in 2020, compared with just 0.1 per cent during the global financial crisis.

Growth Forecasts 1

Source: The Australian

The International Monetary Fund’s economic forecasts are based on expectations that the coronavirus will be contained in the second half of 2020 and that there will be no second wave of infection, but they have warned of the potential for a second wave of the coronavirus if a vaccine is not developed.

Economists seem to agree that the domestic economy is likely to experience a V-shaped recovery when it eventually comes.

Of course the biggest unknown is just how long the coronavirus lockdown restrictions will remain in place.

Look how much the government is spending

The global response to the pandemic will result in a massive increase in government spending and debt.

The IMF estimates that our federal government’s spending and revenue measures will equate to about 10.6 per cent of GDP, which is much higher than any other country, meaning the government must pursue tax and regulatory reform in the aftermath of the crisis.

Stimulus

 

Governments around the world have never before acted like this, shutting down their economies and borrowing and spend on this scale.

They will collectively spend an extra $US3.3 trillion to buoy up their respective economies up output, which are nevertheless expected to shrink 6.1 per cent in 2020 across advanced nations.

Adam Creighton put it well in his column in The Australian:

“Governments will never know how many lives they have saved by prompting the Great Lockdown.
But we should all hope it’s a lot … because the damage most certainly will be.”


NOW READ: Is now a good time to buy property?


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'How bad is Australia’s Coronavirus recession going to be?' have 2 comments

    Avatar

    April 16, 2020 Amayzingone

    Since when has the IMF ever been correct? Or even close?
    For the last 2 years they have been contantly been downgrading thier growth forecasts.
    So by now their GROWTH forecasts are so far off they are on ther WRONG side of the scale. I wouldnt take any notice of the IMF. Their record is attrocious! It always has been.
    To put things into perspective Australia has struggled to achieve 2% growth when things were all good. And now suddenly we are going to get a 6.1% rebound. OMG! What black magic is that?
    Of course they assume the Corona virus will be contained (not).
    So now they have made themselves Health experts as well.
    Considering the WHO got it so wrong I cant imagine the IMF doing any better.
    And even the best guesses for a vaccine is 2 years out – if we get one that works.
    So that makes the earliest possible rebound some time in 2023. Not 2021. That is if a vaccine is even developed.
    To date we have never developed a vaccine for any corona virus. Not one!
    See here: https://www.afr.com/policy/health-and-education/why-a-coronavirus-vaccine-may-never-be-found-20200402-p54gke
    So this article about our recession (more like a depression) is a great example of SUPREME optimism based on totally flawed assumptions (AS ALWAYS).
    They obviously have no idea of the bigger picture that has taken control of the world scene.
    The great unwinding of the huge debt bubble.
    And with that the huge change in attitudes to debt that will occur.
    I think most Australians over the age of 50 who have been through a recession or two realise by now understand that this is no ordinary collapse of the economy.
    What we are witnessing here can only be compared with the magnitude of the Great Depression. And that took 10 years to play out with the same type of government expenditure and central bank interference with the markets.
    And do you think the measures taken by the government are going to replace everyone’s lost income? Not a chance. Not even a fraction of it. Its simple maths 101.
    All I can say is dont get your hopes up based on this unrealistic GUESS by the IMF who have a great track record of getting it WRONG!
    This is no reflection on MY. He is just presenting ther article.
    But what I will say for those smart people that are cashed up:-
    There are going to be some great long term buying opportunities coming up if you can weather the economic storm coming our way. But its important to be patient. Pounce when everyone is telling us to sell. Just like in the GFC. Im sure MY will back me up on that one.

    Reply

      Michael Yardney

      April 16, 2020 Michael Yardney

      It’s really hard to forecast isn’t it? Esp if it’s about the future!

      I agree there will be some great opportunities for those with a long term outlook

      Reply


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