Economic activity declined in the June 2020 quarter by 7 per cent compared to the March quarter. For the 12 months to June 2020, GDP was down by 6.3 per cent and GDP per capita down by 7.4 per cent.
Unfortunately, the economic and financial pain over that quarter was not felt evenly across the economy. Some businesses were down by 100 per cent (if they were shut down) and for others it was hardly different to usual. Overall, even after the government stimulus, economic activity fell by 7 per cent.
The household saving ratio increased to 19.8% from 6.0%. That’s an incredible increase but not surprising in unprecedented and worrying times.
What we do know is that the economic impact was caused by Covid-19. More accurately, it was caused by government imposed restrictions and changes in peoples’ behaviour out of caution and fear.
Had the government not bolstered the economy with cash during the quarter, the GDP decline might have been closer to 20 or 30 per cent. The game is now to ease restrictions, enable businesses to trade and let the economy adjust over time to a new normal type of operation without any more massive government handouts.
Is this achievable? There is no other alternative. Is 7 per cent something to get excited about? Normally calm and reserved economists are certainly getting excited. For everyone else, what is much more important is the percentage that you are going through in your own job or business. Despite all the calamity, there’s still a robust 93% economy out there and that’s where we need to focus.