Pandemic recession could be avoided: economist

While it is widely expected there will be a severe contraction in output in the June quarter, CommSec chief economist Craig James said there was a possibility that the country could avoid registering two negative quarters in a row, which is often cited as the definition of a recession.

"You could not rule out the fact that you could go through this period [without] technically going into a recession," Mr James said. "That would be quite a remarkable result."

There is enormous doubt around the economic outlook given the unprecedented scale and nature of the virus-inspired restrictions that have been implemented around the world and the uncertain course of the virus.

But economists are generally agreed that the downturn in the June quarter will be one of the sharpest and deepest in the nation's history.

Citi's head of Australian economics, Josh Williamson, predicts the economy will contract by 5.7 per cent in the three months to June, the worst outcome ever recorded.

The Commonwealth Bank Group has forecast an even steeper 8.5 per cent fall.

But Mr James said that if the economy managed to eke out a modest expansion in the first three months of the year before social distancing restrictions hit hard in mid to late March, and could stage a mild recovery in the September quarter, there was a chance the country could dodge two consecutive quarters of decline.

Though the Commonwealth Bank Group predicts there will have been a small 0.4 per cent decline in output in the March quarter, Mr James said there was great uncertainty around that figure.

"That can change quite significantly as the data gets published," he said.

Economists will be watching closely for data due to be released in coming weeks showing how employment, retail sales, construction, trade and investment were affected in March.

Panic buying could have driven is a spike in retail sales in March while the labour market added 8800 full-time jobs last month.

Mr James said these factors helped raise the possibility that the economy did not contract in the first three months of 2020.

Combined with forecasts for a small 0.5 per cent expansion in the September quarter before stronger 3.4 per cent growth in the last three months of 2020, this raised the prospect the country could continue its record 29-year run without a recession.

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But Mr Williamson thinks that is unlikely, predicting the impact of the crisis on the economy will be "severe".

He expects data will show growth fell 1.2 per cent in the March quarter and tumbled a further 5.7 per cent in the current quarter before slowly recovering in the second half of the year to reach 2.2 per cent.

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