Australian consumers dragged the national economy from the deepest recession in 90 years in a burst of spending in the three months to September that more than offset any negative impact from the second Victoria lockdown.
The September quarter National Accounts from the Australian Bureau of Statistics revealed a 3.3% jump in GDP for the three months, the highest quarter on quarter rise for more than 50 years.
Market estimates ranged from around 2% (from the likes of the AMP’s Dr Shane Oliver) to 4.1% (the National Australia Bank).
That compares to the negative readings for the March quarter of 0.3%, the June quarter, a 7.0% fall and leaves the economy 3.8% smaller than it was a year ago and sharply lower than the 6.3% fall in 2019-20 which was the biggest fall in annual growth since The Great Depression just on 90 years ago.
After falling a record 12.5% in the June quarter, household spending rebounded in the September quarter, rising 7.9%. But through the year spending remained weak, down 6.5% with the earlier impact of the first wave of infections and lockdowns still being felt
Spending on services rose 9.8%, driven by spending on hotels, cafes and restaurants, health and recreation and culture as lockdowns and containment measures eased.
The easing of restrictions also increased demand for goods, which rose 5.2% and is up 3.5% through the year. That reflects the continuing strong growth in consumer spending in supermarkets and some other sectors – hardware, liquor, furniture – both in person as the lockdowns ease and online where growth is still strong.
Victoria was a negative as expected – household spending fell 1.2%, the only state to record a fall, as tighter restrictions were imposed were maintained and didn’t ease until November, well after the end of the quarter.
“Despite record quarterly growth in household spending, the level in September quarter was 6.8 per cent lower than that recorded in December Quarter 2019,” the ABS said.
The terms of trade rose 0.7% after a 0.2% rise in the June quarter and was due to higher prices for iron ore, copper and gold. Coal, LNG saw price falls while there was an absence of income from inbound tourism and overseas student education. The Australian dollar rose in the quarter as well by around 1% on a trade weighted basis and around 3% against the US dollar
The household saving ratio remained high at 18.9%, a slight fall from 22.1% (revised up from the first estimate of 19.8%) in June quarter when household spending collapsed. (Revised up from 19.8%). The fall was driven by the partial recovery in household consumption, which grew faster than income growth.
Household disposable income grew 3.4%, reflecting increases in both labour and non-labour income as activity in the economy increased. Compensation of employees rose 2.3% this quarter, reflecting an increase in hours worked and a rise in employment. Average compensation per employee rose 0.4%.
Net trade detracted 1.9 percentage points from GDP, the largest detraction since September quarter 1980. Imports of goods and services rose, predominantly reflecting increased demand for consumption goods as restrictions lifted.
Exports of goods of services fell, as a result of weaker demand for Australian mining commodities and constraints on inbound and outbound travel.
The ABS said that domestic final demand contributed 4.3 percentage points to GDP growth. Household final consumption expenditure contributed 4.0 percentage points as restrictions lifted for households and businesses. Public demand contributed a further 0.3 percentage points.
Private investment fell 0.2% this quarter, with increased housing investment offset by a 3.0% fall in business investment (-3.0%). Ownership transfer costs increased 21.4%, as housing market activity rebounded (as we have seen with the continuing rises in house prices as reported by CoreLogic each month) following social distancing measures in the previous quarter.
Renovations and home improvements activity drove a 5.1% rise in alterations and additions (thanks to the Federal Government’s so-called tradie spending package to help this sector).