The S&P/ASX 200 Index (ASX: XJO) is down 2.9% after ratings agency S&P said that Australia would enter into a recession by June.
What did S&P say?
According to reporting by the Australian Financial Review, S&P Global ratings said that Australia's AAA rating is safe for now from the threat of a likely technical recession and the fiscal cost of Australia's upcoming stimulus package.
However, S&P has predicted that Australia will enter a recession by June 2020 because COVID-19 has spread beyond its initial expectations.
There only needs to be two consecutive quarters of GDP declines for a country to enter into a recession.
The ratings agency is predicting that the Australian economy will grow by just 1.2% in 2020 and then rebound. S&P said this is the weakest outlook for 20 years and would be a bigger economic shock than 2008 when GDP growth was just 1.6%.
COVID-19 has had a particularly painful effect on some areas of the Chinese economy, so S&P doesn't think China can provide the same support to the Australian economy as it did a decade ago.
S&P said that all signs are pointing toward a period of soft economic conditions with a slowing global economy, lower consumer and business sentiment, the tourism and education sectors are suffering from travel restrictions and consumption remains weak.
It also made a prediction that unemployment and underemployment will rise, making it harder for the RBA to hit its financial targets.
However, the S&P did pay tribute to Australia's strong fiscal position which gives it some room to maneuver.
What have some individual ASX shares done today?
At the time of writing:
The Australia and New Zealand Banking Group (ASX: ANZ) share price is down 5.4%.
The Commonwealth Bank of Australia (ASX: CBA) share price is down 5.9%.
The Macquarie Group Ltd (ASX: MQG) share price is down 4.2%.
The National Australia Bank Ltd (ASX: NAB) share price is down 5.9%.
The Qantas Airways Limited (ASX: QAN) share price is down 9.2%.
The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is down 4.3%.
The Westpac Banking Corp (ASX: WBC) share price is down 4.8%.
