Australia’s gross domestic product (GDP) fell by -1.9% over the September quarter, reflecting the deep impact of COVID-19 lockdowns across New South Wales, Victoria, and the Australian Capital Territory.
But the latest figures from the Australian Bureau of Statistics (ABS) are far better than regulators and the banks had first anticipated, suggesting the nation is poised to recover strongly from another round of pandemic measures.
The economy contracted nearly two percent due to reduced activity through those lockdowns, the ABS said, as Australia’s two most populous states shut up shop to slow the Delta outbreak.
Final household consumption fell by -11.1% in the ACT, followed by -10.8% in NSW, and -5.2 in VIC, and rose an average of 0.7% across the rest of the nation.
Unsurprisingly, spending on services fell -5.8%, led by downturns in transportation services, which copped a -40.8% deficit, and hotels, cafés, and restaurants, which recorded a -21.2% slide.
The GDP downturn snapped a streak of economic growth sustained each quarter since the drastic -6.8% fall recorded in the June 2020 quarter.
However, a combination of healthy exports, buoyed by strong prices for commodities like coal, LNG, and meat products, appear to have kept the GDP from sliding further.
Supply constraints also limited imports, the ABS said, with net trade ultimately contributing 1% to the GDP over the September quarter.
The results will see Australia’s financial institutions recalibrate their economic projections, after forecasting more severe contractions over Q3.
In its November statement on monetary policy, the Reserve Bank of Australia expected GDP to fall by around -2.5% for the quarter.
Retail banks took a similar approach, with Westpac last month forecasting a -2.5% dip.
Commonwealth Bank’s September prediction was even harsher, with the bank’s head of Australian economics, Gareth Aird, suggesting a collapse of -4.5% was likely.
All told, GDP is now 3.9% through the year, but is still -0.2% below the pre-pandemic December 2019 quarter.
The data now reframes expectations for the December quarter, which may deliver further economic growth — should the Omicron variant not pose further issues to the national reopening plan.
“This outcome highlights that once restrictions are eased and the virus is under control (either through low case numbers or high vaccination rates), the economy can recover rapidly,” said Sarah Hunter, chief Australia economist for BIS Oxford Economics.
“This finding is increasingly being confirmed by the labour market and retail spending data, and it’s likely that there will be a sharp turnaround in GDP in the December quarter.”
The report also suggests festive period spending may be led by households whose savings grew over the lockdown period.
The household saving ratio grew 8% to 19.8% in the three months to September, as a downturn in demand, dividend payments, and household economic support combined to shield some Australians from the worst economic impacts of the lockdowns.