- The latest GDP figures show Australia’s economy grew 3.3% in the September quarter.
- The data officially ends Australia’s first recession in 29 years, after two consecutive quarters of negative growth.
- However, while the growth outlook for Australia is positive, there is still plenty of weakness in the economy, including its jobs market.
- Visit Business Insider Australia’s homepage for more stories.
Australia’s economy is officially growing again but the country is still headed for a whole lot more pain.
The latest GDP figures out on Wednesday show that the Australian economy grew 3.3% in the September quarter, returning the nation to growth.
Household spending helped drive the economy, up 7.9% as Australians splashed out on goods and especially services, up 9.8% alone. But zooming out, it’s clear the economy has a long way to go.
“Despite record quarterly growth in household spending, the level in September quarter was 6.8% lower than that recorded in December Quarter 2019,” ABS head of national accounts Michael Smedes noted.
After two consecutive quarters of economic contraction — the definition of a recession — it technically marks the end of Australia’s first in three decades.
But while the semantics might be comforting, the reality is far more complex. While Australia’s economic recovery is progressing “better than expected”, the Reserve Bank of Australia (RBA) noted yesterday, there are still some major challenges to overcome.
Australia’s economy did, after all, shrink 7.3% in the space of six months, with current forecasts suggesting it will take more than a year to just return Australia to its 2019 size.
Australia’s unemployment rate is ticking up and is expected to keep rising until the end of the year. While more than 170,000 jobs were created last month, it hasn’t been enough to sate the growing number of Australians looking for work — particularly as government support starts receding.
Nor have the jobs necessarily been the ones workers want, with a large number of new jobs being in part-time and casual work as businesses remain cautious.
It’s been enough for the RBA to rate Australia’s level of unemployment as an “important national priority”, and key to its eventual recovery.
Even with Australia’s economy expected to grow at 5% next year and 4% in 2022, the RBA and federal government alike expect it will take years to return the unemployment rate to anything resembling ‘normal’.
The central bank for its part has already confirmed it is preparing to keep the official cash rate at 0.1% for the next three years, providing unprecedented guidance on how much support the economy is expected to require as it comes to terms with the damage wrought by the pandemic.
There are of course some bright spots and the potential that the economy may outperform yet. For one, much of the country has managed to suppress new case numbers with great success, relative to the rest of the world.
It’s seen Victoria reopen, providing a near half of all new jobs created in October, a feat it is expected to repeat in the next set of figures. Coming in October, the bounce didn’t even factor into Wednesday’s GDP figures.
Resurgent economic activity, encouraged by the oncoming festive season and the heightened savings of households, could see spending pick up even further from here.
Record low interest rates and bolstered government incentives meanwhile have sparked a flurry of property demand, helping house prices recover lost ground. The resulting positive wealth effect, by which homeowners benefit from growing asset values, may help the recovery along as well.
In sum, the outlook for Australia’s economy is nothing if not complicated. So while the end of a technical recession is welcome news, it’s a long and winding road to recovery yet.
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