Invest
Australians spend their way out of recession
The Australian economy saw strong growth in the September quarter, ending the first recession the country has had in almost three decades.
Australians spend their way out of recession
The Australian economy saw strong growth in the September quarter, ending the first recession the country has had in almost three decades.
The national accounts, released by the Australian Bureau of Statistics (ABS) showed that economic activity rose 3.3 per cent over the September quarter – the strongest quarterly growth since the 1970s. Household spending drove the economy, rising 7.9 per cent due to increased spending on goods and services.
“Following the record 7.0 per cent decline in the June quarter, Australia experienced a partial recovery in the September quarter. As a result, economic activity fell 3.8 per cent through the year to September quarter,” head of national accounts at the ABS Michael Smedes said.
What drove the economy?
Household spending was the main contributor to a rise in economic activity.
The ABS reports a 7.9 per cent increase in spending on both goods and services.
Spending on services rose 9.8 per cent, driven by spending on hotels, cafes and restaurants, health and recreation, and culture as containment measures were relaxed. The easing of restrictions also increased demand for goods, which rose 5.2 per cent.
Victoria’s household spending fell 1.2 per cent, the only state to record a fall, as tighter restrictions were imposed.
The household saving-to-income ratio remained elevated at 18.9 per cent, a slight fall from 22.1 per cent in June quarter when household spending collapsed.
BetaShare's chief economist David Bassanese pointed to the government's response throughout the crisis as a reason for the quick bounceback.
"Thanks to ample fiscal and monetary support, the economy last quarter displayed an admirable ability to bounce back quickly once severe social distancing restrictions were lifted. Far from being under pressure, households have been left flush with cash and keen to spend, "he said.
"Due to the restrictions imposed on household activity, it was a slump in consumer spending that drove us into recession and it’s been a sharp rebound in spending that has led the way out.”
Mr Smedes added: “Despite record quarterly growth in household spending, the level in September quarter was 6.8 per cent lower than that recorded in December quarter 2019.”
Mr Bassanese points out the increase in spendings and low rates could be a positive for the economy in the short-term.
"Notwithstanding the caution of policy makers, the economic outlook heading into next year appears quite encouraging. A vaccine should once and for all put the COVID crisis behind us, and households appear well placed to keep spending given their still high saving rate. We’re also likely to see a boom in domestic tourism and a further recovery in housing activity in anticipation of an eventual recovery in immigration.”
“The RBA’s promise to keep interest rates at near-zero for a further three years appear dangerous to my mind, as together with a recovering economy it could well spark a speculative surge in asset prices," he concluded.
RELATED ARTICLES
About the author
About the author
Economy
RBA's interest rate hike impacts Australian employment landscape
The Reserve Bank of Australia (RBA) has decided to increase interest rates by 25 basis points, raising the cash rate to 3.85%. This move, aimed at controlling inflation, has elicited responses from ...Read more
Economy
RBA’s latest rate hike sparks debate over economic impact
In a surprising move, the Reserve Bank of Australia (RBA) has increased the cash rate, signalling a significant shift in its monetary policy approach. This decision comes amid a backdrop of unexpected ...Read more
Economy
When inflation reopens the rate door: A broker-sector case study in defending margins, clients and share
Australia’s latest trimmed-mean inflation reading at 3.3% has revived the prospect of another Reserve Bank move and put lenders, brokers and borrowers back on a tightening footing. This case study ...Read more
Economy
Inflation rise dampens hopes for interest rate cuts as employment dynamics shift
In a development that has dashed hopes for an interest rate cut, Australia's Consumer Price Index (CPI) has surged back to 3.8%, erasing the progress made since October. This unexpected rise in ...Read more
Economy
Inflation surge poses challenges for small businesses and consumers
The latest inflation figures have sparked concern among Australian businesses and consumers alike, with the rising costs expected to influence the Reserve Bank of Australia's (RBA) upcoming interest ...Read more
Economy
Australia’s spending surprise raises the odds of a February rate move — here’s how to protect margin and momentum
Household outlays are running hotter than economists expected, with the latest ABS readings showing broad-based gains across services and goods. That resilience is exactly the kind of demand impulse ...Read more
Economy
Australia’s inflation cools to 3.4% — why the RBA’s next move still isn’t a lay‑up for business
Headline inflation easing is good optics; balance sheets feel something different. With year‑on‑year CPI down to 3.4% in November from 3.8%, hopes for rate relief are rising — but policymakers remain ...Read more
Economy
Inflation cools to 3.4% — but the RBA’s reaction function keeps businesses on a knife-edge
Australia’s headline CPI edged down to 3.4% year-on-year in November, from 3.8%, easing immediate pressure but not eliminating the risk of further tightening. With services inflation sticky and ...Read more
Economy
RBA's interest rate hike impacts Australian employment landscape
The Reserve Bank of Australia (RBA) has decided to increase interest rates by 25 basis points, raising the cash rate to 3.85%. This move, aimed at controlling inflation, has elicited responses from ...Read more
Economy
RBA’s latest rate hike sparks debate over economic impact
In a surprising move, the Reserve Bank of Australia (RBA) has increased the cash rate, signalling a significant shift in its monetary policy approach. This decision comes amid a backdrop of unexpected ...Read more
Economy
When inflation reopens the rate door: A broker-sector case study in defending margins, clients and share
Australia’s latest trimmed-mean inflation reading at 3.3% has revived the prospect of another Reserve Bank move and put lenders, brokers and borrowers back on a tightening footing. This case study ...Read more
Economy
Inflation rise dampens hopes for interest rate cuts as employment dynamics shift
In a development that has dashed hopes for an interest rate cut, Australia's Consumer Price Index (CPI) has surged back to 3.8%, erasing the progress made since October. This unexpected rise in ...Read more
Economy
Inflation surge poses challenges for small businesses and consumers
The latest inflation figures have sparked concern among Australian businesses and consumers alike, with the rising costs expected to influence the Reserve Bank of Australia's (RBA) upcoming interest ...Read more
Economy
Australia’s spending surprise raises the odds of a February rate move — here’s how to protect margin and momentum
Household outlays are running hotter than economists expected, with the latest ABS readings showing broad-based gains across services and goods. That resilience is exactly the kind of demand impulse ...Read more
Economy
Australia’s inflation cools to 3.4% — why the RBA’s next move still isn’t a lay‑up for business
Headline inflation easing is good optics; balance sheets feel something different. With year‑on‑year CPI down to 3.4% in November from 3.8%, hopes for rate relief are rising — but policymakers remain ...Read more
Economy
Inflation cools to 3.4% — but the RBA’s reaction function keeps businesses on a knife-edge
Australia’s headline CPI edged down to 3.4% year-on-year in November, from 3.8%, easing immediate pressure but not eliminating the risk of further tightening. With services inflation sticky and ...Read more
