The Australian economy expanded another 3.1 per cent in the final three months of 2020 as consumers opened their purse strings and key coronavirus restrictions were lifted.
But figures from the Australian Bureau of Statistics on Wednesday showed despite the December quarter performance, the national economy is still 1.1 per cent smaller than when the coronavirus pandemic started.
The economy grew by 3.1 per cent in the December quarter as consumers opened their wallets. Despite the result, the economy is still 1.1 per cent smaller than what it was before the coronavirus pandemic.Credit:Getty Images
The economy contracted by 7 per cent in the March quarter as key parts of the country were shut down due to the pandemic. The economy has now recorded its two largest consecutive quarterly increases in GDP on record, with 3.4 per cent in the September quarter and now 3.1 per cent.
The strong result, above market expectations of 2.5 per cent, was driven strongly by the re-opening of the Victorian economy.
Victorian household consumption spending jumped 10.4 per cent in the quarter as coronavirus restrictions eased across the state and household expenditure on cafes and restaurants, recreation and culture, clothing and footwear, hotels, health and vehicles increased.
Nationally, household spending rose 4.3 per cent this quarter but remained 2.7 per cent down through the year.
Spending on goods rose 2.8 per cent for the quarter and is up 6.2 per cent through the year. Purchase of vehicles rose a record 31.8 per cent, reflecting elevated household disposable income and shifting spending patterns with continued limitations on some expenditure items such as international travel.
Spending on services rose 5.2 per cent. This reflects a partial recovery with spending down 7.8 per cent through the year. Recreation and culture, hotels, cafes and restaurants and health all continued to rebound as movement and trading restrictions eased.
The extra spending by consumers was aided by a sharp 6.7 percentage point drop in the household savings ratio through the quarter. It still remains elevated at 12 per cent.
State final demand increased by 6.8 per cent in Victoria between September and December. This was followed by 4.1 per cent in the Northern Territory, 3.3 per cent in Tasmania and 2.9 per cent in NSW. Queensland jumped 2 per cent.
By industry, the agricultural sector led the nation.
Favourable weather conditions contributed to a large grain harvest through the quarter. This lifted the gross value add of the farming sector by 26.8 per cent.
That fed through to extra activity in wholesale trade (up by 3.6 per cent) and transport (6.1 per cent).
Rural exports also jumped by 23.5 per cent.
There was a rebound in the hospitality and arts and recreation sectors as pandemic restrictions were lifted. Despite this, annual activity across hospitality is down by 13.2 per cent while for arts and recreation it has suffered an 8.2 per cent drop.
Private investment jumped by 3.9 per cent, contributing 0.7 percentage points to the quarterly growth result. Government initiatives such as HomeBuilder and the expanded instant asset write-off contributed to the lift.
The federal government’s $25,000 grant for new home building and state and territory housing incentives contributed to a 9.6 per cent rise in dwelling investment in Queensland, a 9.2 per cent increase in Tasmania, an 8.9 per cent increase in Western Australia and a 3 per cent jump in Victoria.
While spending from consumers increased, household income actually fell as non-labour income programs fell due to a reduction in government support payments.
Despite the strong lift, quarterly GDP is still $5.6 billion lower than what it was in the December quarter of 2019.