Covid 19 coronavirus: Australia in recession - Economic plunge worst on record

The Covid-19 crisis has decimated Australia's economy. Photo / 123RF

Economists knew today's economic figures were going to be bad, but the actual news is much worse than anyone feared.

Australia's finances have been hit with the biggest quarterly fall on record and the steepest annual plunge since the end of World War II.

The release of the June national accounts data this morning revealed the catastrophic extent of the coronavirus crisis.

Data paints a picture of an economic bloodbath, with the economy contracting by a staggering seven per cent through the quarter. That's the worst-ever result.

It follows a modest 0.3 per cent contraction in the March quarter.

Previously, the biggest drop was in 1974, when the Australian economy contracted by just 2 per cent in the June quarter.

It means we are now in the grip of our first recession in 30 years – amid the worst yearly growth contraction since WWII.

The economic disaster is even more severe than expected by experts and even the Reserve Bank.

Economists had predicted the figures to show a five to seven per cent contraction, with the final result at the higher end of the range forecast.

"The global pandemic and associated containment policies led to a 7.0 per cent fall in GDP for the June quarter,'' Head of National Accounts at the ABS, Michael Smedes said.

"This is, by a wide margin, the largest fall in quarterly GDP since records began in 1959."

The catastrophic impact of the coronavirus crisis on the economy has revealed in stark detail. PhOTO / sUPPLIED

The JobKeeper and JobSeeker programs to support Australian households and businesses resulted in record payments from the public to the private sectors.

Welfare payments rose a record 41.6 per cent, due to increased number of recipients and additional support payments.

Spending on services fell by a whopping 17.6 per cent, with falls in transport services, operation of vehicles and hotels, cafes and restaurants.

"The June quarter saw a significant contraction in household spending on services as households altered their behaviour and restrictions were put in place to contain the spread of the coronavirus," Smeddes said.

Hours worked also fell a record 9.8 per cent.

Finance Minister Mathias Cormann said the tough shutdowns were a necessary part of controlling the spread of the virus.

"I'm not going to predict the figures ahead of the release this morning, but we do need to expect a severe contraction and we know what has caused it – economies around the world have been hit very hard by the impact of the coronavirus pandemic," he told Sunrise this morning.

"We were hit by an unexpected crisis which came out of nowhere and clearly the first priority was to protect people's health and save people's lives by suppressing the spread of the virus and that was absolutely necessary," Cormann said.

Labor treasury spokesman Jim Chalmers said it was a dark day for Australian families.

"We are in the midst of a deep and devastating recession and that has consequences for millions of Australians," Chalmers said.

Chief economist for BIS Oxford Economics Sarah Hunter said a recovery would not be easy.

"Looking ahead, it is clear that the path back from the Covid-19 recession will be protracted. Growth in the September quarter will be weighed down by the lockdown in Victoria, and beyond this continued health concerns, ongoing restrictions and the dialling back of income support will all weigh on the economy. We expect it to take until early 2022 for activity to return to pre-pandemic levels," she said.