Australia’s insurance industry faces a slow recovery period with low growth after taking a hit from slumping motor vehicle sales and a ban on property auctions due to the coronavirus pandemic, London-based analytics company GlobalData says.

The firm says the industry will decline 1.3% to $114.1 billion this year from $115.7 billion, while the compound annual growth rate forecast for 2019-24 has been revised to 1.8%, compared to 4.2% previously.

Australia is forecast to enter its first recession in 30 years due to the virus outbreak, despite the government assistance measures that are being rolled out.

“Enhanced government spending is expected to moderate the impact of COVID-19 on the economy,” GlobalData Insurance Analyst Sangharsan Biswas says.

“However, the recovery phase will be a long-drawn one and the insurance business will take time to get back to its pre-COVID growth rates.”

Mr Biswas says weaker consumer spending is likely to cause vehicle sales to decline 30% this year, which will in turn impact the motor insurance business.

Lockdown measures have also hit property auctions and new sales may be suspended for some time.

“The resulting slowdown of the property market, which was just recovering from a slump, translates to lower premium growth for the property insurance business,” he says.

“New property sales will be on hold till the situation stabilises. This adds to the pressure on the insurance industry’s profitability, which is already facing high claims from recent bushfires.”

The International Monetary Fund forecasts Australia’s economy will shrink 6.7% this year, but it expects it may rebound by 6.1% next year.