Sea of red swamps Australian stocks as recession looms
Australia will soon be mired in recession as the spread of coronavirus delivers a painful economic shock, one of the world's most influential credit rating agencies warns.
And consumer confidence has slumped to its weakest level in five years as the outbreak takes a heavy toll, according to separate research.
The downbeat developments on Wednesday came as a sea of red again engulfed the Australian Stock Exchange, dragging it into a "bear market".
As sellers again swarmed the exits, the benchmark ASX 200 index tumbled another 3.6 per cent, stripping $64 billion from the market's value.
Since February 20, when it was at a record high, it has slumped 20.1 per cent - crossing the 20 per cent mark broadly regarded as the threshold for a bear market. The amount cut from the value of the nation's biggest listed companies in that period stands at $430 billion.
Stepping up its warnings about the impact of the coronavirus outbreak on Wednesday, credit rating agency Standard & Poor's said it now expected the economy to slide into recession by June.
It would be the first such recession for Australia in almost 30 years.
The nation's prized triple-A credit rating would also come under pressure "if weak economic conditions are more prolonged than we currently expect", S&P Global Ratings analysts said in a research report.
"This is the weakest economic outlook in 20 years and means the COVID-19 outbreak would be a greater economic shock to Australia than the global financial crisis," they said. Last week, S&P said it was expecting Australia would suffer a "technical recession" as the economy shrunk this quarter and next before rebounding.
The analysts said they had not factored in the impact of stimulus measures due to be announced by the federal government on Thursday.
That may help avert a recession, but at the same time such stimulus would weaken the government's Budget position, they said.
Westpac and research house the Melbourne Institute said their closely-watched index of consumer sentiment had fallen heavily this month.
The index dropped 3.8 per cent, clocking in at 91.8 points - a five-year low and the second worst reading since the GFC more than a decade ago.