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
Australia’s growth beat is real — but it’s the wrong kind for capacity
Australia’s economy outpaced forecasts in the June quarter as households opened wallets and government spending did the heavy lifting, even as public investment sagged. The signal for boardrooms: ...Read more
Economy
Australia’s growth is back—but it’s the wrong kind of strong
GDP surprised on the upside in the June quarter, powered by households and government outlays even as public investment slumped. The Reserve Bank stayed hawkish, signalling that sticky services ...Read more
Economy
Australia's Economic Resilience: Strong GDP growth challenges RBA's policy stance
In a surprising turn of events, Australia's economy has shown greater resilience than anticipated, with the latest Q2 GDP report revealing a stronger performance largely driven by vigorous household ...Read more
Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more
Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more
Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more
Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more
Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more
Economy
Australia’s growth beat is real — but it’s the wrong kind for capacity
Australia’s economy outpaced forecasts in the June quarter as households opened wallets and government spending did the heavy lifting, even as public investment sagged. The signal for boardrooms: ...Read more
Economy
Australia’s growth is back—but it’s the wrong kind of strong
GDP surprised on the upside in the June quarter, powered by households and government outlays even as public investment slumped. The Reserve Bank stayed hawkish, signalling that sticky services ...Read more
Economy
Australia's Economic Resilience: Strong GDP growth challenges RBA's policy stance
In a surprising turn of events, Australia's economy has shown greater resilience than anticipated, with the latest Q2 GDP report revealing a stronger performance largely driven by vigorous household ...Read more
Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more
Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more
Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more
Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more
Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more
