Steven Kennedy, the secretary to the Treasury, told a senate inquiry into the government's response to COVID-19 on Thursday that he was optimistic that Australia avoided the "destructive cycles" of an economic depression.
He said that depressions typically involve long periods of high unemployment and low growth but that he was optimistic about Australia's recovery.
"The glimmer of hope is all that productive enterprise that sat there at the beginning sits there at the end," Kennedy said.
"The question is whether you've avoided the destructive cycles of firms going broke because they just ran out of cash across the bridge and people losing confidence and becoming very precautionary."
"The way we entered this and the nature of this shock gives me some hope that if governments respond well, particularly through their fiscal levers, that we needn't have what's called the L-shaped economy, and I guess that's what people would think more of as depression-type economics."
However, he warned that the outlook would change significantly if a second wave of the virus forced a second shutdown.
Treasurer Josh Frydenberg revealed earlier in May that restrictions introduced to prevent the spread of COVID-19 were costing the economy 4 billion Australian dollars (2.6 billion U.S. dollars) per week.