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Economies Of Australia, New Zealand Show Coronavirus Damage

Australia’s jobless rate surges to 19-year high while New Zealand’s economy shrinks by the most since 1991.

The economies of Australia and New Zealand have suffered major damage brought about by measures to contain the coronavirus, new figures released on Thursday show.

New Zealand’s economy shrank by 1.6 percent in the March quarter, the largest drop in 29 years and the first quarterly fall since December 2010, as the initial effects of coronavirus curbs paralysed activity.

The contraction was worse than economist forecasts for a 1 percent fall but smaller than the central bank’s projection for a 2.4 percent drop.

The decline is expected to have deepened in the current quarter due to the tighter restrictions imposed by the government in April and May, Finance Minister Grant Robertson said.

That would put New Zealand in its first technical recession, defined as two straight quarters of contraction, since 2010, although a recent easing in curbs is expected to aid a recovery in the second half.

“Now, our focus is on protecting jobs and supporting the economy to recover and rebuild through the investments made in Budget 2020 and by the COVID Response and Recovery Fund,” Robertson said. “By opening up the economy quicker than forecast, we’ve got a head start on our recovery.”

The 1.6 percent decline was the largest quarterly fall since the March quarter of 1991.

Economists have warned the data may not fully capture the extent of the economic effects of lockdowns designed to limit the spread of the coronavirus, which were only enforced towards the end of the first quarter.

“Growth was subdued even before the virus outbreak,” Ben Udy, Australia and New Zealand economist at research firm Capital Economics, said in a research note sent to Al Jazeera.

“With only one week of New Zealand’s lockdown falling in [the first quarter], we expect things to get much worse in [the second quarter]. While most restrictions on activity were lifted in June the strict lockdown measures covered most of April and were only gradually eased in May,” Udy said.

New Zealand is among a handful of countries that have emerged out of the coronavirus pandemic, largely due to its strict lockdowns that forced almost everyone to stay at home and all but essential businesses to shut.

All restrictions, except border controls, were lifted last week, but the tough measures brought the economy to a standstill for weeks.

Service industries contributed the most to the drop in activity, while the construction industry and household consumption expenditure also fell.

A drought also led to a 1.9 percent fall in agricultural output, particularly in the dairy and meat sector, Udy said.

Australian unemployment surges

Meanwhile, neighbouring Australia’s unemployment rate jumped to the highest in about 20 years in May as nearly a quarter of a million people lost their jobs due to coronavirus pandemic-driven shutdowns there.

Employment in May plunged a further 227,700 after a record slump of about 600,000 in April, figures from the Australian Bureau of Statistics (ABS) on Thursday showed.

The unemployment rate shot up to 7.1 percent, the highest since October 2001, from an upwardly revised 6.4 percent in April and broadly in line with economists’ expectations in a Reuters poll.

The figures highlight the economic damage wrought by the pandemic as mobility restrictions forced businesses to down shutters since late March.

Robert Carnell, Asia-Pacific head of research at Dutch bank ING, said the proportion of working-age Australians in employment – the so-called labour force participation rate – fell to 62.9 percent in May compared to 63.6 percent in April.

“That suggests many unemployed becoming disaffected with their chances and drifting out of the labour force. Some may not return when the economy revives,” Carnell said in a note sent to Al Jazeera.

Source: https://www.aljazeera.com/ajimpact/economies-australia-zealand-show-coronavirus-damage-200618055802939.html

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