(Australian Associated Press)
If there was any doubt Australia is suffering its first recession in almost three decades, a pointer to the future state of the economy shows it is deep in negative territory.
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months in the future, confirms the economy is in recession.
The index, which measures the outlook relative to Australia’s trend rate at around 2.8 per cent, was minus 4.79 per cent in May compared to minus 5.08 per cent in April.
“Despite the slight improvement, the index growth rate remains in deep negative territory consistent with an economic recession,” Westpac chief economist Bill Evans said on Wednesday.
However, Westpac has revised its growth forecast for the first half of 2020 to a contraction of 7.3 per cent from minus 8.8 per cent previously.
This followed a slightly smaller than expected 0.3 per cent decline in growth in the March quarter and an earlier than expected easing of coronavirus restrictions.
“A deep recession is still forecast,” Mr Evans said.
The official June quarter growth figures are not due until September.
The Reserve Bank of Australia’s minutes from its June 2 board meeting released on Tuesday said the Australian economy was experiencing the biggest economic contraction since the 1930s.
The board believes the downturn could be shallower than earlier expected given the rate of new infections had declined significantly and some restrictions had been eased earlier than thought likely.
However, it said the outlook remained highly uncertain and the pandemic was likely to have long-lasting effects.
Labour force figures for May will be released on Thursday, which economists expect could see the unemployment rate rise further to seven per cent, its highest level in 21 years.
The rate jumped to 6.2 per cent from 5.2 per cent in April, the biggest month-on-month rise on record as nearly 600,000 people lost their job in the face of the pandemic.