Australia’s economy survived the Covid Delta lockdowns in NSW, Victoria and the ACT in the third quarter to emerge in solid condition and looking at a rebound in the three months to December.
The fall followed four consecutive rises since the 6.8% fall recorded in June quarter 2020 when the entire country was in lockdown. GDP in the September quarter 2021 was 0.2% below December 2019 pre-pandemic levels.
The latest national accounts from the Australian Bureau of Statistics (ABS) on Wednesday showed the lockdowns pushed the economy to a 1.9% contraction in the September quarter as household spending was crunched as expected, which in turn saw retail sales slide and business stocks balloon.
But the record trade performance, plus government support trimmed the downturn from the 3% or so forecast by most economists.
The contraction left the economy 0.2% smaller than it was at the end of 2019, before the first Covid wave and lockdowns.
While it was the third largest quarterly fall in economic activity on record, GDP still rose a solid 3.9% through the year to September.
The drop was driven by the lockdowns in NSW, Victoria and the ACT.
Household spending in those three jurisdictions fell by 8.4% in the quarter, while across the rest of the country spending was up by 0.7%.
That meant private demand detracted 2.4 percentage points from GDP as household spending on services such as hotels and cafes 5.8%
Net trade contributed 1% as both exports (+1.2%) and imports (-4.0%) contributed to growth in the quarter, the ABS said.
Exports of mining and rural commodities rose, reflecting global demand for coal, LNG and meat products (and the fading iron ore price boom).
Imports of goods fell, reflecting continued global supply constraints and the fall in household demand.
Acting Head of National Accounts at the ABS, Sean Crick said:
“Domestic demand drove the fall, with prolonged lockdowns across NSW, Victoria and the ACT resulting in a substantial decline in household spending.
Public demand contributed 0.7 percentage points to GDP growth, with increases in health-related spending in response to the spread of the COVID-19 Delta variant.
Public investment fell slightly but remained at elevated levels as public infrastructure projects continued.
The household saving to income ratio rose from 11.8% to 19.8%. The rise in household saving was driven by increased household income, coupled with a decline in spending. Household gross disposable income rose 4.6%, the fastest rise since December quarter 2008.
Government support payments to households and unincorporated businesses affected by COVID-19, along with increased dividend payments, contributed to the increase in household income.
“The household saving ratio was below the previous peak of 23.6 per cent in June quarter 2020, when national lockdowns drove a larger decline in household spending compared with this quarter,” Mr Crick said.
The terms of trade rose 0.4% in the quarter to be up more than 23% over the year.
Australia has largely reopened, the Omicron variant is “already disrupting economic reopening”, ratings agency Standard & Poor’s said on Tuesday.
“We are still in the throes of a global pandemic and new variants continue to pose risks to economic recoveries,” it said in a briefing note.
“While living with the virus has reduced COVID’s impact on the economic outlook, new outbreaks of unknown severity cast a shadow on this narrative.”