The recession is officially over, with Australia’s economy growing 3.3 per cent in the September quarter, according to new figures.
The economy went into recession in the June quarter after the worst contraction in gross domestic product since World War II.
But the Australian Bureau of Statistics on Wednesday confirmed an uptick in GDP, after shrinking 7 per cent in the previous quarter.
“Australia has performed better on the health and on the economic fronts than nearly any other country in the world,” Treasurer Josh Frydenberg said.
“Real GDP increased by 3.3 per cent beating market expectations, this is the largest quarterly increase since 1976.
“Technically, Australia’s recession may be over. But Australia’s economic recovery is not.
“There is a lot of ground to make up and many Australian households and many Australian businesses are doing it tough.”
The new figures show a household consumption spike of 7.9 per cent in the September quarter, the largest rise in the 60-year history of the national accounts.
The rise claws back a majority of the unprecedented 12.5 per cent drop in the June quarter, as services spending jumped 9.8 per cent.
“Household spending in the quarter was driven by partial recovery in spending on hotels, cafes and restaurants, recreation and culture and transport,” the ABS said regarding the rise in 14 of the 17 categories.
The resumption of elective surgeries and increased visits to health providers saw spending on health categories jump 26 per cent.
Experts are heralding the figures as a win, given Melbourne was in lockdown for a large portion of the quarter.
Victoria was the only state to record a fall, 1 per cent, which was driven by declines in household spending and investment.
Spending on food rose 6.6 per cent as families prepared for the second coronavirus lockdown.
This partly offset a decline in spending on clothing, recreation and furnishing across the state.
Mr Frydenberg said national growth in the September quarter would have been 5 per cent, if Victoria had grown in line with the rest of the nation.
Nationally, household saving also decreased from 22.1 per cent to 18.9 per cent.
Dwelling investment was up by 0.6 per cent following eight consecutive quarterly falls, prompting Mr Frydenberg to say the outlook for the housing market was “positive”.
Imports rose 6.5 per cent in line with household consumption but exports decreased by 3.2 per cent in the quarter, and were 14.9 per cent lower through the year.
“Services exports including tourism and education continue to be particularly affected as international borders remain closed,” Mr Frydenberg said.
Business investment fell by 4.1 per cent with mining investment down by 5.2 per cent and non-mining investment down by 3.7 per cent.
GDP per capita fell by 4.7 per cent in the September quarter with spending decreasing 6.5 per cent over the year.
The technical definition of a recession is two consecutive quarters of negative growth, which occurred in the June quarter.
However, the easing of coronavirus restrictions in most states and territories contributed to the economic rebound in the September quarter.
New South Wales and Queensland saw the largest recoveries in demand, registering a 6.8 per cent uptick.
That was just ahead of South Australia (6.7 per cent) and the Northern Territory (6 per cent).
Tasmania (5.5 per cent) and the ACT (2 per cent) registered increases while Western Australia, which had less ground to make up, saw demand rise 4.9 per cent.
“80 per cent of the 1.3 million Australians who either lost their jobs or saw their working hours reduced to zero at the start of the pandemic are now back at work and Australia’s AAA credit rating has been reaffirmed,” Mr Frydenberg said.
“The rebound in employment together with social assistance benefits which are 48.3 per cent higher through the year have contributed to an increase in household disposal income of 3.4 per cent in the September quarter.”
Ahead of the national account figures being released, Opposition treasury spokesman Jim Chalmers said even a “substantial recovery” wouldn’t make up all of the ground lost or damage done to jobs and the economy.
“Headlines heralding the end of the recession will be cold comfort for many Australians still living with the effects of the largest downturn in almost 100 years,” Dr Chalmers said.
“Hundreds of thousands of jobs have been lost since the virus outbreak began and more Australians are expected to join the unemployment queues by Christmas.
“The latest OECD Economic Outlook has warned the Morrison Government that premature cuts to vital support in the economy will hamper Australia’s recovery from the worst downturn in almost a century.”
The Reserve Bank of Australia on Tuesday held the cash rate at 0.1 per cent.
Governor Philip Lowe warned it would take until the end of 2021 for the economy to reach 2019 output levels.
He predicted unemployment would remain above 6 per cent over the next two years.
“These positive figures cannot hide the reality that the recovery will be uneven, bumpy and drawn-out,” Dr Lowe said.
“Some parts of the economy are doing quite well, but others are in considerable difficulty, even as the overall economy is growing relatively solidly.”
The Organisation for Economic Co-operation and Development also released forecasts which predict Australia’s economy will contract by 3.8 per cent in 2020.
Treasurer Josh Frydenberg said this compared favourably to an average fall of 5.5 per cent across all advanced economies.
“In addition to the effectiveness of JobKeeper, the OECD notes the importance of the Government’s economic recovery plan, in particular personal income tax cuts, JobMaker hiring credit and planned insolvency, reforms which it describes as ‘key’,” he said.
Global GDP is expected to contract by 4.2 per cent this year, before picking up by 4.25 per cent in 2021.
“The recovery will be uneven across countries, potentially leading to lasting changes in the world economy,” the economic outlook report stated.
CreditorWatch chief economist Harley Dale said the combination of super-low interest rates and hefty fiscal policy had created the defensive line Australia required in 2020 to avoid the chronic impact that COVID-19 is having in Europe and the United States.
“The RBA does not meet in January but will, no doubt, keenly watch the performance of the retail sector over Christmas and the holiday season,” Mr Dale said.
“It is widely expected that this sector, battered by the adverse consequences of COVID, will enjoy better returns in December/January than was considered likely even only a few months ago.”