Australia suffers first recession in 29 years

Sydney/Hong Kong(CNN Business) Australia's economy is suffering its first recession in nearly three decades as the nation grapples with the impact of the coronavirus pandemic.

The country's economy shrank 0.3% in the first three months of the year from the previous quarter, according to the Australia Bureau of Statistics. Treasurer Josh Frydenberg on Wednesday warned that GDP will shrink in the April-to-June period, marking the second consecutive quarter of contraction for Australia.

The Covid-19 shutdown has caused the end of a 29-year run of economic growth in Australia. The streak was partly fueled by China's voracious appetite for commodities, such as iron ore and coal, as it rose to become the world's second largest economy.

Despite the recession, Frydenberg said Australia has "avoided the economy fate, and the health fate" of other countries because of actions it has taken, including economic stimulus efforts.

Australia's GDP is likely to "plummet" by 9% in the second quarter, according to Ben Udy, an economist for Australia & New Zealand at Capital Economics.

"GDP was falling before the virus restrictions were in place and is set to fall more sharply in Q2 [the second quarter] before picking up gradually in the second half of the year," he wrote in a research note on Wednesday.

The fall in GDP during the first quarter was mainly because consumers cut back spending on services as they began to socially distance, Udy said.

Udy expected consumption to be nearly 20% below its pre-virus levels in the second quarter, as households stopped panic buying food and restrictions on recreation and retail services were introduced.

While rising iron ore prices may support mining investment, non-mining firms have significantly scaled back their investing plans, he said.