By Michael Yardney December 2, 2020

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Australia is officially out of recession – that was quick!

Michael Yardney's Commentary
Australia is officially out of recession – that was quick!

We knew it, but now it's official, Australia's economy rebounded strongly in the September quarter.

Australia is out of it's "technical recession" after posting a 3.3 per cent jump in September quarter GDP – the biggest in more than 44 years – clawing back almost half of the 7 per cent collapse in the June quarter.

While the bounce is impressive, especially given the extended lockdown in Melbourne, it still leaves the economy 4.2% smaller than it was prior to the pandemic and it is still down 3.8 per cent for the year following a record 7.0 per cent decline over the June quarter, according to Australian Bureau of Statistics.

Household saving ratio remains at a high level

There's more good news as the latest ABS stats show that the average Australian household is in a great financial shape.

We're stashing our cash and paying down our credit card debt and we've got significant savings.

While the household saving to income ratio declined from its record high last quarter, it remains elevated at 18.9%.

Household disposable income grew 3.4% in the last quarter as activity in the economy increased snd the fall in our savings ratio was driven by the partial recovery in household consumption, which outpaced income growth.

Yes, we're well on the way to economic recovery.

Private demand drives the rise

Domestic demand contributed 4.3 percentage points to GDP growth.

Household final consumption expenditure contributed 4.0 percentage points as we spent more as restrictions were lifted for households and businesses.

Public demand contributed a further 0.3 percentage points.

Household spending recovers

After falling a record 12.5% in June quarter, household spending rebounded in September quarter, rising 7.9%.

Spending remained weak, down 6.5% through the year.

Reductions in COVID-19 case numbers led to the relaxing of social distancing measures and other restrictions, encouraging spending on services which rose 9.8%.

Hotels, cafes and restaurants, recreation and culture and transport services rebounded.

Spending on health services recovered as deferred elective surgeries and visits to medical practitioners resumed.

Spending on goods increased 5.2% this quarter and is up 3.5% through the year.

Melbourne lockdown constricts Victoria's economy

Victoria’s state final demand fell 1.0%, the only state to record a fall, driven by declines in household spending and investment.

More stringent restrictions associated with the second lockdown resulted in a 9.8% fall through the year.

Household spending declined 1.2% in September quarter, driven by clothing and footwear, furnishings and recreation and culture.

Spending on food rose 6.6%, partly offsetting the fall, as households prepared for the second lockdown.

Government consumption continues to support growth

Not surprisingly government expenditure increased 1.4%, the ninth consecutive rise, driven by increased social benefits to households as patient visits to medical practitioners and elective surgeries resumed this quarter, following the easing of restrictions.

Net exports detracted 1.9 percentage points from GDP

Imports of goods and services rose 6.5%, supported by increased demand for consumption goods as restrictions on the economy lifted.

Exports of goods and services fell 3.2%, reflecting continued international travel bans and reduced demand for Australia's mining commodities.

The detraction from net exports this quarter is the largest since September quarter 1980.

Source: Australian Bureau of Statistics

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About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.