Ahead of Wednesday’s Australian Q2 GDP release, analysts at Citigroup warned about a potential return of a technical recession for the economy amid ongoing lockdowns due to the rapid spread of the Delta covid variant.
Key quotes
“Australia’s economy may have shrunk slightly in the three months through June, setting up the bad “optics” of a technical recession when combined with the lockdown-induced contraction expected for the current quarter.”
Net exports are “expected to out-weigh all positive domestic growth drivers including household consumption, government demand, business investment” and others.”
“The optics of such a result would be poor.”
Sydney is now in its 10th week of lockdown and Melbourne and national capital Canberra are also under stay-at-home orders.
Meanwhile, New South Wales (NSW) reported a record rise of 1290 new infections on Monday while Victoria recorded 73 new cases.
Market reaction
AUD/USD has eased off weekly highs at 0.7319, despite a bit beat on the Australian Company Operating Profits data, as markets see a cautious start to a new week.
