Wednesday’s GDP numbers are spectacular, however they’re for the December quarter, after we have been bouncing again from Delta


Australia’s financial system welcomed 3.4% within the December quarter of 2021, greater than reversing the lockdown-related decline of 1.9% within the September quarter. This was the sixth largest improve within the 60 years the figures have been compiled.

Australian quarterly GDP

Collection quantity measurement, adjusted seasonally.
ABS Nationwide Accounts

The financial system grew 4.2% in December throughout the 12 months, making it 3.4% bigger than two years in the past, which was pre-COVID.

That is just like what occurred in the USA, 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 that is spectacular underneath the circumstances, actual GDP was set to climb 6% as an alternative of three.4% in these two years earlier than the pandemic. That is what the Reserve Financial institution was predicting.

south east vs relaxation

It largely depends upon the place you reside. NSW, Victoria and the ACT have been constrained by the lockdown within the September quarter.

These states made the strongest comeback within the December quarter.

It’s noteworthy, and regarding, that in different states one of the best measure of whole expenditure, the state’s closing demand, has hardly elevated or lags behind.

State’s closing demand, December quarter

seasonally adjusted.
ABS Nationwide Accounts

Family spending was the primary driver of the sturdy GDP.

It bounced again within the December quarter as unemployment fell, vaccination charges soared and client confidence climbed forward of Omicron within the perception that COVID was coming underneath management.

home closing consumption expenditure

Collection quantity measurement, adjusted seasonally.
ABS Nationwide Accounts

Expenditure on companies elevated. Private and different companies, the class that features hairdressing, climbed a document 15%.

There was additionally some huge improve in spending on non-essential gadgets. There was a soar of greater than 40 p.c within the buy of garments and footwear.

Elements of Home Remaining Consumption Expenditure

December quarter development in actual home closing consumption expenditure.
ABS Nationwide Accounts

Households are saving an unusually excessive proportion of their earnings throughout the pandemic.

The financial savings ratio hit a document excessive at the beginning of the pandemic, fell throughout the 2020 restoration, rose once more throughout the 2021 lockdown, and fell within the December quarter.

Nevertheless it stays, because the treasurer stated in his press convention, almost 3 times what it might have been in any other case with out the pandemic.

family financial savings ratio

The ratio of financial savings to tax earnings, adjusted seasonally.
ABS Nationwide Accounts

Many of the financial savings are the results of warning, however a lot additionally displays authorities assist applications that maintained earnings at a time when individuals have been restricted of their potential to spend on journey, eating places, cinemas, gyms and different companies.

Some depressed companies spending was diverted to items, additional rising provide constraints and contributing to inflation.

Stock climbed $1.5 billion after declining $2.9 billion within the September quarter as wholesalers restocked, which additionally contributed to GDP development.

Learn extra: Australia cuts unemployment sooner than anticipated – why cease now?

Export volumes declined because the decline in coal exports (reflecting heavy rains and labor shortages) exceeded the expansion in agricultural exports (reflecting a document grain harvest).

Housing development additionally fell aside from improvement as constructing development was delayed as a consequence of lack of labor and supplies.

cake sharing

How was this excessive GDP earnings shared amongst Australians?

Treasurer Josh Frydenberg was eager to level out that the wage invoice elevated by greater than 5% throughout the 12 months as extra employees received jobs, larger bonuses have been paid and employees switched to raised jobs and received promotions. , a type of increment not captured within the official. Wage Value Index.

The wage share of nationwide earnings remained at an all-time low. Wage development is lagging behind worth will increase, which implies employees are getting a smaller a part of the pie than they’ve been used to.

Wage share of whole issue earnings

Workers’ compensation, together with wages, salaries and Social Safety contributions.
ABS Nationwide Accounts


The December quarter was between the majority of Delta and the majority of Omicron.

After Omicron’s outbreak in late December, working hours dropped 9% in January as employees grew to become in poor health, remoted and caring for sick family and friends.

Client sentiment worsened in each January and February, with the deal with hike in petrol costs and hike in rates of interest.

Russia’s invasion of Ukraine, and subsequent improve in petrol costs, is more likely to dampen sentiment additional.

Learn extra: Inflation hits 3.5%, however it will not shake RBI on rates of interest

Because of this the following GDP launch, masking the March quarter, will largely go backwards, taking down GDP development with it.

Thankfully for the federal government, it isn’t as a consequence of be launched till Wednesday 1 June, safely after the election, which should be held till Saturday 21 Could to keep away from a separate quasi-Senate election.


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