Mr Lowe said Australia’s stronger-than-expected economic recovery has been interrupted by outbreaks of the highly infectious Delta strain of the coronavirus, especially in NSW.
Greater Sydney’s long lockdown, Victoria and south-east Queensland’s current snap lockdowns and the earlier short shutdowns in Victoria and South Australia are expected to send the economy backwards in the September quarter.
But Mr Lowe believed another double-dip recession – defined as two consecutive quarters of negative gross domestic product – was unlikely, after Australia experienced its first recession in 29 years in the first half of 2020.
“I think it’s quite unlikely that we’ll have two quarters of negative GDP,” he said.
Mr Lowe predicted GDP will decline by at least 1% in the September quarter, with a bigger fall possible depending on whether there are further lockdowns, and how long the existing ones last.
“But by the end of the year, many of us will be vaccinated, one hopes the restrictions are being eased from late in this quarter and then into next quarter, and as the restrictions are eased the economy should start its recovery.
“We can’t rule out two quarters of negative GDP if the health situation deteriorates but I think it’s quite unlikely at this stage.”
Mr Lowe said significant parts of the Australian economy remain on the positive trajectory that was in place before the recent outbreaks, which was quite different to the situation in the first half of 2020 when the whole of Australia was in lockdown.
“It is important not to lose sight of the fact that not all of Australia is affected,” Mr Lowe said.
He said the experience in Australia, and elsewhere, is that once restrictions are lifted, spending recovers strongly and the economy bounces back quickly.
“While the exact timing of the bounce-back is difficult to predict, it is likely to start well before the end of the year,” he said.
“The vaccination program is ramping up and governments are providing significant targeted income support to help businesses and households get through this difficult period.
“This means that there is a pathway out of the current difficulties this year.”