Australia’s financial system bounced again a welcome 3.4% within the December quarter of 2021, greater than reversing the 1.9% lockdown-related decline within the September quarter. It was the sixth-biggest enhance within the 60 years the figures have been compiled.
Australian quarterly gross home product
Chain quantity measures, seasonally adjusted.
ABS Nationwide Accounts
The financial system grew by 4.2% over the 12 months to December, making it 3.4% greater than it was two years earlier, earlier than COVID.
That is much like what occurred in america, however higher than what occurred within the European Union and South Korea. The economies of the UK and Japan are nonetheless smaller than they have been earlier than COVID.
Whereas it’s spectacular within the circumstances, had there been no pandemic, actual GDP was set to climb 6% reasonably than 3.4% over these years. That’s what the Reserve Financial institution had been forecasting.
The South East versus the remainder
It depended very a lot on the place you lived. NSW, Victoria and the ACT have been constrained by lockdowns within the September quarter.
These states bounced again most strongly within the December quarter.
It’s notable, and regarding, that within the different states, the perfect measure of whole spending, state last demand, barely grew in any respect or went backwards.
State last demand, December quarter
Seasonally adjusted.
ABS Nationwide Accounts
Family spending was the principle driver of the stronger GDP.
It bounced again within the December quarter as unemployment fell, vaccination charges rose and shopper confidence climbed forward of Omicron within the perception COVID was coming below management.
Family last consumption expenditure
Chain quantity measures, seasonally adjusted.
ABS Nationwide Accounts
Spending on providers surged. Private and different providers, the class that features hairdressing, climbed by a file 15%.
There have been additionally some huge will increase in spending on non-essential items. Purchases of clothes and footwear jumped by greater than 40%.
Parts of family last consumption expenditure
December quarter development in actual family last consumption expenditure.
ABS Nationwide Accounts
Households have been saving an unusually excessive proportion of their revenue in the course of the pandemic.
The saving ratio soared to a file excessive early within the pandemic, fell in the course of the 2020 restoration, soared once more in the course of the 2021 lockdowns, and fell within the December quarter.
Nevertheless it stays, because the Treasurer stated in his press convention, round thrice what it will have in any other case been with out the pandemic.
Family saving ratio
Ratio of saving to net-of-tax revenue, seasonally adjusted.
ABS Nationwide Accounts
A lot of the saving is the results of warning, however a lot additionally displays authorities assist packages that maintained incomes at occasions when folks have been restricted of their skill to spend on journey, eating places, cinemas, gyms and different providers.
A number of the pissed off providers spending was diverted to items, exacerbating provide bottlenecks and contributing to inflation.
Inventories climbed $1.5 billion after a fall of $2.9 billion within the September quarter as wholesalers restocked, additionally contributing to GDP development.
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Export volumes fell because the discount in coal exports (reflecting heavy rain and labour constraints) outweighed the rise in agricultural exports (reflecting a file grain harvest).
Housing building additionally detracted from development as shortages of employees and supplies brought on delays in constructing.
Sharing the cake
How have been the proceeds of this greater GDP shared amongst Australians?
Treasurer Josh Frydenberg was eager to level out the wages invoice climbed by greater than 5% via the 12 months as extra employees discovered jobs, greater bonuses have been paid and employees switched to raised jobs and acquired promotions, a type of wage development not captured within the official wage value index.
The wages share of nationwide revenue remained close to an all-time low. Wage development is lagging value development, that means employees are getting a smaller share of the pie than they’ve been used to.
Wages share of whole issue revenue
Compensation of workers together with wages, salaries and social safety contributions.
ABS Nationwide Accounts
Wanting ahead
The December quarter was between the majority of Delta and the majority of Omicron.
After the outbreak of Omicron in late December, hours labored slid 9% in January as employees grew to become sick, remoted and caring for family and friends who have been sick.
Client sentiment deteriorated in each January and February as petrol costs rose and a spotlight turned to rate of interest rises.
Russia’s invasion of Ukraine, and the following additional surge in petrol costs, is prone to depress sentiment additional.
Learn extra:
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This implies the following GDP launch, overlaying the March quarter, will fairly doubtless go backwards, taking GDP development down with it.
Thankfully for the federal government, it isn’t due for launch till Wednesday June 1, safely after the election which have to be held by Saturday Might 21 to keep away from a separate half-Senate election.
John Hawkins was previously an financial analyst and forecaster within the Reserve Financial institution and Treasury.
