Technical recession is still likely despite stimulus package: Westpac

EXPERT OBSERVERS

The Government’s Fiscal Stimulus Package is a bold initiative to bolster the Australian economy’s defences against the damage likely to be wrought by COVID–19.

It is imaginative and works through boosting investment while providing real incentives to protect jobs.

Earlier in the week Westpac forecast that without any Stimulus Package the economy would experience a technical recession of two consecutive quarters of negative growth (in March and June). Although, with growth expected to recover strongly in the second half of 2020 the unemployment rate was unlikely to exceed 6%

Our analysis of the Package suggests that the initiatives are only likely to offset the contraction in the June quarter that we had estimated earlier in the week rather than lift growth into positive territory.

However, the current domestic and global environment has deteriorated more rapidly than we had expected. The downside risks to our central case forecast that we envisaged earlier in the week are now materialising.

For us, despite the Government’s bold efforts the June quarter is still likely to show negative growth and Australia will experience a technical recession.