Australia's economy has recorded its third-biggest fall on record, as COVID lockdowns shut economic activity across the mainland's south-east.
Key points:
- Australia's GDP fell 1.9 per cent in the September quarter, but economists had expected a 2.7 per cent slide
- A 4.8 per cent slump in household spending led the drop, due to lockdowns across the south-east
- Household saving rose to 19.8 per cent due to the fall in spending plus stimulus payments that boosted disposable incomes
But business owners, workers and analysts are all observing a strong bounce back, leaving little doubt that Australia's economy will recover most or all of the lost ground over the current December quarter.
Alex Cadger runs The Blonde Group, a catering and events business, in Sydney.
During the latest lockdown, his business started delivering baked goods and boxed food, as well as delivering gifts for corporate clients.
"The goal was not to be profitable and make a lot of money — the goal was really to keep the staff employed … so that when we were able to reopen, everyone was engaged and employed," he told The Business.
It is a strategy that appears to be paying dividends.
With Sydney reopening, Mr Cadger said the demand for events is back with a vengeance and his clients are willing to splash out.
Mr Cadger's experience has been reflected in the Bureau of Statistics's National Accounts released today, and more timely economic indicators since.
Gross domestic product (GDP) slumped 1.9 per cent in the September quarter, amid lockdowns across mainland Australia's south-east.
But the result was much better than most economists had feared, with forecasts centring on a 2.7 per cent quarterly decline as large parts of the economy were shut in New South Wales, Victoria and the ACT for most or all of the September quarter.
Those lockdowns showed up in a 4.8 per cent fall for household consumption spending, led by a 5.8 per cent slump in services spending focused on hospitality (down a whopping 21.2 per cent), recreation and culture, and transport.
AMP Capital senior economist Diana Mousina said it appears that Australians are indeed learning to live with COVID, lockdowns included.
"I think households and businesses are learning how to deal with lockdowns better than what we saw last year," she told ABC News.
The acting head of national accounts at the Australian Bureau of Statistics (ABS), Sean Crick, said non-lockdown states also helped partially offset the decline in Australia's south-east.
"Household spending in NSW, Victoria and the ACT fell 8.4 per cent compared with the other states, which rose 0.7 per cent," he said.
"The fall in domestic demand was only partly offset by growth in net trade and public sector expenditure."
However, the public sector also softened the blow for the economy through support payments that saw household gross disposable income rise 4.6 per cent — the most since the Rudd government's global financial crisis stimulus payments in the December quarter of 2008.
Small and medium enterprises contributed to the jump in income with a surprise 8 per cent bounce in profits, also no doubt helped greatly by stimulus payments.
That rise in incomes combined with the slump in spending saw the household savings ratio jump from 11.8 to 19.8 per cent, which was approaching the record high of 23.6 per cent hit during the first, nationwide COVID lockdown in the June quarter of 2020.
Double-dip COVID recession avoided for now
Despite last quarter's dive, Australia's economy was still 3.9 per cent bigger than it was at the same point in 2020, after the initial COVID-19 lockdowns resulted in the worst quarterly fall on record of 6.8 per cent in the June quarter of 2020.
Although the September quarter drop again left Australia's economy smaller than it was prior to the COVID-19 pandemic.
"GDP in the September quarter 2021 was 0.2 per cent below the December quarter 2019 pre-pandemic level," Mr Crick said.
However, economists expect that to change in the current quarter, with official and private-sector retail sales figures indicating that Australians released from lockdown are using part of their increased savings to spend.
Freelance actor Adriane White, who works several jobs and was stood down during Sydney's long lockdown, is a case in point.
Towards the end of lockdown, she found she was being offered more shifts and will soon be back close to her regular work schedule.
"I would say there's actually more work, there seems to be a big boom, lots of shifts going," she observed.
And she is planning to spend more herself on seeing live theatre and arts events after months of missing out.
"We need a community, we need that feeling of connection … if it does mean there is a bit of a spending boost in that arena, then I'll be doing my part," she added.
In the outer northern suburbs of Melbourne, Heath Lawley is also seeing pent-up demand for group fitness at his newly-opened gym.
"Having the social aspect back into our community is super important," he said, having delayed opening the business for around a year-and-a-half due to multiple COVID lockdowns in Victoria.
On the business front, ABS figures indicate that, while investment fell during lockdown, expected investment for this financial year jumped.
Mr Cadger is doing his bit.
After signing a lease for a new headquarters for this year, he is next looking to purchase a standalone events space.
"I don't like to be too conservative in business," he said.
Ms Mousina said that meant there would not be another technical recession (two consecutive quarters of economic contraction) in Australia this year after last year's COVID recession.
However, she warned that the emergence of new COVID variants would continue to pose a risk to the economic outlook next year.
"While the government says that they don't want to put us into a lockdown, we still have to say that is a major risk," she explained.
"We have seen some parts of Europe having to have additional restrictions go up before the Omicron variant was even announced to the world.
But, after his experience over the past couple of years, Mr Cadger is not too concerned.
"I'll go day by day with [the new variant]. If that becomes an issue, we will do exactly what we did last time and get through it."
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2021-12-01 04:13:32Z
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