Australia’s economy shrank by 7pc in the three months to June, forcing the country into its first official recession in almost 30 years.

The drop in GDP was the sharpest on record and was bigger than economists had predicted. A second spike in coronavirus infections and regional lockdown in Victoria deepened the downturn.

It means the pandemic has achieved what the financial crisis could not, with two consecutive quarters of falling GDP spoiling the nation’s run without a recession since 1991.

Spending on transport, hotels and restaurants plunged by well over half compared to the same period a year ago, while businesses offering clothes, recreation and vehicles were also heavily affected.

At the same time Government spending surged, with money going to households more than offsetting the 2.2pc fall in employee pay.

Josh Williamson, an analyst at Citi, said that an unprecedented A$62bn (£34bn) of stimulus was doled out through rescue schemes for companies and workers. He expects at least A$50bn more in the third quarter.

As a result families found their incomes held up even as spending plunged due to lockdown restrictions, so they could save more, potentially paving the way for a stronger recovery when the pandemic is over. Savings rates rocketed from 6pc of income to 19.8pc.

However, it is hard to judge when the recovery will take hold.

Australia performed well early on in the pandemic, cracking down on the spread of the virus and raising hopes that the country would escape the worst.

As a result its recession is relatively shallow compared to other nations, though still very sharp by historical standards. However, the country is now battling a renewed rate of infections in Victoria.

Robert Carnell, an economist at investment bank ING, said: “The Victoria outbreak has turned out to be a much bigger deal than it [initially] appeared, and fear of transmission has kept social distancing and internal travel restrictions high in other states too."

The Reserve Bank of Australia estimates this new round of infections could knock two percentage points off GDP for the year as a whole, but Mr Carnell fears this may underestimate the damage from sustained lockdowns.