Australia is officially in a recession - here's what that means
Australia's economy is in recession for the first time since 1991, thanks to global COVID-19 pandemic.
On its face, the term is a statistical acknowledgement bandied through the media of the economic pain wrought by this global pandemic. But what conditions actually define a recession, and what does it mean for the road to recovery?
What is it?
The definition of a recession favoured by most journalists and economic commentators is two consecutive quarters of negative growth is real gross domestic product (GDP).
Australia last satisfied this definition in 1990-1991, when GDP fell by 1.7% and unemployment rose 10.8%. Not since then has Australia been in recession, the world's longest uninterrupted streak of economic growth.
How bad is it?
But all good things come to an end, and end it has. The economy shrank 0.3% in the March quarter. Lockdown measures came into effect mid-March, so it's a foregone conclusion that the June quarter will be much worse.
Asked earlier this month whether Australia is now in recession, Treasurer Josh Frydenberg said: "The answer to that is yes, and that is on the basis of the advice I have from the treasury department about where the June quarter is expected to be."
What does it look like?
Though recessions are measured by their negative affect to GDP output, their impact on the economy is unique depending on the problems that cause it.
"This recession is unique in that it's deeper, with a much bigger loss of GDP: We're visiting restaurants, gyms, or airports less frequently or not at all," says Bob Baur, chief global economist at Principal Global Investors.
"The recession will be selective in who it hurts: this is a small business recession concentrated in service industries. Manufacturers are holding up better. Some large companies are hiring big numbers of people.
The 1990-1991 recession was a result of tight monetary policy that sought to lower excess domestic demand, reign in speculative behaviour in the commercial property market, and reduce inflation.
In contrast, this recession is the result of controlling a global pandemic by closing businesses and encouraging or enforcing people to avoid crowds.
"Since the cause was unique, it's likely the downturn and aftermath will be quite different."
Zip co-founder Peter Gray says there's a clear two-speed recovery emerging in the business economy, largely dictated by the social distancing measures and the substitute living habits people have adopted in light of them.
"While large shopping centres have resembled Christmas shopping-sized crowds in recent weeks, pubs and bars are still limited to 50 patrons.
"This disparity of easing will continue to impact the business landscape, and particularly the small to medium sized enterprises, who are fronting large costs to adjust their places of trade."
Australians have made the most of their time cooped up at home, picking up the tools and shopping online.
"We have been particularly interested in the bolstering of spend in the past quarter on building and renovation, which is interesting in light of the recent government stimulus package.
"The shift to ecommerce-first and online payments has intensified, and we've seen the transformation of retail accelerate over the past three months."
Some of these behavioural changes will be temporary, but others may be here to stay.
"What we don't know yet is whether some of the hardest hit industries will ever fully recover. We've seen trends in fitness and beauty that suggest that at-home equivalents may take the place of gyms and salons. We'll have a fuller picture on these industries in the coming months as restrictions are eased."