US Q1 data the 'starkest picture' of what happens when you 'shut your economy down' by Sky News Australia on YouTube
US Q1 data the 'starkest picture' of what happens when you 'shut your economy down'
InvestSMART's Evan Lucas says Australia should be concerned about the impact of the consumption element of GDP to the economy as the "starkest realisation" of what happens when you "shut your economy down and almost crash it". Mr Lucas said the US economy should serve as a warning to Australia after it contracted 4.8 per cent in its first quarter - the worst loss since the height of the 2008 global financial crisis. "In the US, it went from being a contributor of about 1.2 per cent of GDP to being a contractor of 4.99 per cent," Mr Lucas said. Almost 55-65 per cent of Australia's GDP comes from consumption in services such as restaurants, cafes, tourism and education. Mr Lucas said "the consumption side of GDP" will be under "incredible pressure" after tourism was adversely affected from January "because of the bushfires". This was followed directly by a travel ban on Chinese tourists and students as COVID-19 first began to spread globally from Wuhan in China. "It is going to be a very deep and strong recession globally," he said. Despite dire economic forecasting, markets continue to rally, on track for their best month since 1994, creating a confusing disconnect between economy and market. "Maybe the market was expecting an even stronger contraction - I don't think you're through it yet," Mr Lucas said. Image: News Corp Australia
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InvestSMART's Evan Lucas says Australia should be concerned about the impact of the consumption element of GDP to the economy as the "starkest realisation" of what happens when you "shut your economy down and almost crash it". Mr Lucas said the US economy should serve as a warning to Australia after it contracted 4.8 per cent in its first quarter - the worst loss since the height of the 2008 global financial crisis. "In the US, it went from being a contributor of about 1.2 per cent of GDP to being a contractor of 4.99 per cent," Mr Lucas said. Almost 55-65 per cent of Australia's GDP comes from consumption in services such as restaurants, cafes, tourism and education. Mr Lucas said "the consumption side of GDP" will be under "incredible pressure" after tourism was adversely affected from January "because of the bushfires". This was followed directly by a travel ban on Chinese tourists and students as COVID-19 first began to spread globally from Wuhan in China. "It is going to be a very deep and strong recession globally," he said. Despite dire economic forecasting, markets continue to rally, on track for their best month since 1994, creating a confusing disconnect between economy and market. "Maybe the market was expecting an even stronger contraction - I don't think you're through it yet," Mr Lucas said. Image: News Corp Australia
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