The Australian economy contracted by 1.9 percent in the September quarter (Q3), when state lockdowns against the Delta variant of COVID-19 occurred, but it was less than the 2.5 to 3 percent drop that economists were fearing.
The Australian Bureau of Statistics (ABS) revealed in the latest National Accounts that despite the quarterly drop, Australia’s GDP was still up 3.9 percent for the year. The household savings ratio also increased from 11.8 percent to 19.8 percent on the back of substantial government stimulus.
“But the 1.9 percent decline in the September quarter was no surprise,” Treasurer Josh Frydenberg told ABC radio. “We had 13 million Australians who were in lockdown with our two biggest states, New South Wales and Victoria.”
Frydenberg said things were turning around as consumption and retail sales recorded strong figures, including on Black Friday.
“So, I’m looking forward to a strong Christmas and a very strong new year,” he said.
Commonwealth Bank’s head of Australian economics Gareth Aird said the national accounts were a “stark reminder” of the big negative impact of lockdowns on the economy.
“It was the third largest quarterly fall in GDP according to the ABS records which date back to 1959 (the largest decline, of course, being the 7 percent fall in Q2 2020),” Aird wrote (pdf).
Aird said the fact that the economy “only” shrunk by 1.9 percent amid lockdowns indicated that many businesses were able to adapt and keep production running.
“It may seem strange to say it, but the 1.9 percent fall in output was a decent result all things considered,” he said.
ANZ Senior Economist Felicity Emmett said today’s report, along with other data, suggests that much of the lost activity in Q3 will be recouped in the December quarter.
“With household balance sheets in great shape, a large pipeline of residential and non-residential construction, and investment incentives helping to boost the capex outlook, the outlook for 2022 is very positive,” Emmett said.
Emmett noted that the biggest uncertainty was Omicron, but it was too early to predict its impact.
Frydenberg said the government was still learning about Omicron, but he did not think the new variant would significantly affect the economy.
“From everything I see right now, the trajectory the economy is on right now is a positive one, and it’s not deviating from that,” he told FIVEaa radio.