The Australian economy grew 3.3 per cent in the three months to the end of September - its strongest growth since 1976, effectively ending the 2020 recession.
However, annual growth remains 3.8 per cent down as the country recovers from the Covid-19 lockdown and resulting recession.
It follows a record 7.0 per cent decline over the June quarter, with the Australian Bureau of Statistics’ head of national accounts Michael Smedes describing Thursday’s figures as representing a “partial recovery”.
Economists had predicted a 2.5 per cent quarterly increase and a 4.4 per cent annual drop, with the figures overshooting both expectations.
Treasurer Josh Frydenberg said the figures show Australia’s recovery is under way.
“Facing a once-in-a-century pandemic that has caused the greatest economic shock since the Great Depression, Australia has performed better on the health and on the economic fronts than nearly any other country in the world,” he said.
Household spending leads the recovery
Household spending rose 7.9 per cent and led the recovery as Aussies spent big on goods and services.
“Household spending drove the economy,” the ABS said in its release, noting that eased restrictions boosted demand.
Services spending rose 9.8 per cent, with restaurants, cafes and hotels enjoying the injection along while health, recreation and culture spending also leaped higher.
Victoria was the only state to see household spending fall, down 1.2 per cent, as it undertook a 112-day lockdown.
"Despite record quarterly growth in household spending, the level in September quarter was 6.8 per cent lower than that recorded in December Quarter 2019,” Smedes noted.
Nevertheless, these figures reflect the largest increase household consumption increase in the 60 year history of the ABS’ national accounts.
The household savings ratio, which measures the amount of income households save, has declined over the September quarter but remains high at 18.9 per cent.
The ABS said that while the economy is growing, net exports are dragging. It noted that net exports detracted 1.9 per cent from quarterly GDP - the largest impact since the 1980 September quarter.
At the same time, while goods and services imports increased by 6.5 per cent, exports slipped 3.2 per cent.
The ABS said this came down to “continued international travel bans and reduced demand for Australia’s mining commodities”, although it didn’t specifically mention the ongoing trade spat with China.
‘Cold comfort’ as millions remain unemployed
Shadow treasurer Jim Chalmers said the GDP is welcome, but added that it’s unsurprising given the “extraordinarily low base”.
The GDP rebound in the September quarter is welcome but unsurprising given the easing of restrictions around much of Australia and the fact it is coming off an extraordinarily low base. #auspol
— Jim Chalmers MP (@JEChalmers) December 2, 2020
Additionally, Chalmers noted that Australia’s unemployment rate remains bloated at 7 per cent.
“Today’s headline number is cold comfort for millions of Australians looking for work, or more work. For many people what looks like a recovery on paper will still feel like a recession,” Chalmers said on Twitter.
“What really matters is not one quarterly GDP number on a page but how Australians are actually faring and whether they can provide for their loved ones.”
Frydenberg said that while the recession is over, the recovery is not.
“There is a lot of ground to make up and many Australian households and many Australian businesses are doing it tough - very tough,” he said.
“The road ahead will be long, hard and bumpy.”
Around 1.5 million Australians continue to receive JobKeeper payments, after 2.2 million moved off the payments in the last two months.
However, those who still receive the payments face a $100 weekly income cut from January and the removal of the payments altogether in March.
Additionally, the JobSeeker unemployment is scheduled to reduce in value in January, even as economists call on the Government to permanently raise the rate.
China problem looms
Frydenberg said that while the economic recovery is underway, Australia’s trade dispute with China is a “very serious situation”.
“China is our number one trading partner. Many Australian jobs rely on trade. Many Australian jobs rely on trade.”
He said the Government is focusing on striking Free Trade Agreements with a range of partners including China and will continue to work for Australian exporters.
Australia’s $200 billion relationship with China has come under increasing pressure in recent weeks as China imposed additional tariffs on Australian wine.
Frydenberg said Australia will work to reach bilateral deals.
“We'd like to sit down and have that mutual and beneficial dialogue but in the absence of that, we obviously have options to use multi-lateral forums.”