First Australian recession in 29 years

Australia has entered its first recession in 29 years. National GDP plunged 7 per cent in the June quarter, the largest economic decline recorded since ABS records began. It confirms economic predictions made by the Chamber of Commerce and Industry WA and underlines the need for significant economic reform to support business investment and job creation.

Western Australia’s economy contracted 6 per cent in the June quarter, surpassing our worst-ever quarterly decline of 4.9 per cent in 1989. At the same time, Western Australia recorded 1.1 per cent growth in its domestic economy in 2019-20, the only state to grow last financial year and exactly as predicted by CCIWA in its Outlook report.

Western Australia’s quarterly fall in State Final Demand was exceeded only by Victoria, New South Wales and Tasmania, which have grappled with recurring lockdowns and local outbreaks, or rely heavily on international education and tourism.

The result was driven by an extraordinary retreat by WA consumers. Drained of demand, WA businesses reliant on discretionary spending felt the biggest impacts. Significant losses of activity were recorded in hotels, cafes, restaurants and transport businesses, with their high proportion of young workers.

Outside machinery and equipment investment by the mining sector, the few items Western Australians spent more on were rent, insurance and alcohol.

The results show that even historic government support – which has helped to shield jobs during the crisis – can only cushion the blow so much. WA businesses and households will be further battered by the eventual expiry of emergency Government fiscal support like JobKeeper and apprenticeship wages subsidies, but also State measures like temporary tenancy and lease agreements, energy payment suspensions and license waivers.  This is the next front in the economic storm.

To recover from this crisis, WA must foster better conditions to support business growth, investment and confidence. CCIWA business and consumer surveys indicate that for 98 per cent of participants, a clear economic plan would improve their confidence. In particular, today’s result illustrates the urgency for National Cabinet to work towards creating a more competitive business environment by reducing or eliminating uncompetitive taxes. CCIWA’s Recovery Reform Roadmap offers concrete policy action to secure our revival, by keeping costs low, improving regulation, strengthening skills and infrastructure, and re-entering the global market.

Aaron Morey

CCIWA Chief Economist

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