GDP fell 0.3% in Q1 – the first quarterly fall since Q1 2011 – and was slightly weaker than our expected decline of 0.1%. This result reflects the early economic impacts of the coronavirus pandemic, where consumer spending and investment both fell around 1%. These factors subtracted a large 0.8pp from Q1 GDP growth, but were offset by strong government spending and net exports. The outcome in the quarter also reflected the general pattern of activity over the past year where net exports and government spending have supported growth while the private sector has been soft. As a result, growth in annual terms is now at its slowest pace since the GFC at 1.4% – and before the more significant impact of the pandemic flows through the accounts. Indeed, we continue to expect a large decline in GDP in Q2 before the beginnings of a recovery in Q3. This sees a large rise in the unemployment rate and a recovery in jobs growth and the unemployment rate that will take time. On the policy front, we see rates remaining low for an extended period and the likely need for more fiscal support as existing measures are legislated to end. A detailed update to our forecasts will be released next week.

Find out more in the NAB GDP Q1 2020.