Australia’s economy is officially on the road to recovery, with the national accounts showing GDP increased by 3.3 per cent in the September quarter.
The positive result marks an end to six months of economic contraction and comes after a record 7 per cent fall in the June quarter.
Consumers led the way with national household consumption rising by a record 7.9 per cent due to increased spending on goods and services.
Household spending increased in all states except Victoria, where consumption fell by 1.2 per cent over the quarter as a result of prolonged COVID-19 restrictions.
BIS Oxford Economics chief economist Dr Sarah Hunter said the results were better than expected.
“Household spending was the key driver, with private consumption regaining almost 60 per cent of the loss seen in the June quarter despite the lockdown in Victoria,” she wrote in a note.
“As a result, the savings rate fell back over 3 percentage points despite incomes rising further (continued government support and the recovery in the labour market drove the increase).”
“Nevertheless, the household savings ratio remains incredibly high at 19 per cent and that indicates that households remain cautious,” added Callam Pickering, APAC economist at jobs site Indeed.
Michael Smedes, the head of the national accounts at the Australian Bureau of Statistics, said the figures pointed to a “partial recovery” in the national economy.
But he said overall GDP was still 3.8 per cent lower than the same time last year and household spending was down 6.5 per cent.
“Following the record 7.0 per cent decline in the June quarter, Australia experienced a partial recovery in the September quarter,” he said.
“As a result, economic activity fell 3.8 per cent through the year to September quarter.”
The GDP results came as the governor of the Reserve Bank, Philip Lowe, gave evidence before the Australian parliament’s Standing Economics Committee on Wednesday morning.
Dr Lowe said the immediate recovery from the coronavirus recession had been stronger than he expected three months ago.
As a result, the bank no longer expects unemployment to hit 10 per cent and believes it will peak below 8.
“So there has been an upgrade to our outlook,” Dr Lowe said.
“It’s not changed in the medium term, but the bounce back has been quicker than we’d hoped, and if we get good news on the vaccine, then I think we could look forward to that continuing.”
Dr Lowe added, however, that “even with the overall economy now growing solidly, it will not be until the end of 2021 that we again reach the level of output recorded at the end of 2019”.
The governor said the bank expects the unemployment rate will remain above 6 per cent in two years’ time and will consequently put downward pressure on annual wages growth, which is expected to stay below 2 per cent in each of the next two years.
That is the bank’s central scenario, though Dr Lowe said it “does not envisage a vaccine being widely available to most Australians until late next year at the earliest”.
“It also assumes that significant restrictions on international travel are still in place at the end of 2021,” he said.
“Recent medical breakthroughs give us some hope that things will work out better than this.
“If so, confidence would lift and there would be a further easing of restrictions.
“The result would be an upside surprise to growth and jobs, especially given the significant policy stimulus that is already in place, the generally strong balance sheets, and the substantial government incentives for businesses to employ people and invest.”