Josh Frydenberg (left) with US Secretary of the Treasury, Steven Mnuchin, during a meeting of the IMF in Washington DC in 2019. Photo credit: Wikimedia Commons
Australian GDP (Gross Domestic Product) rose 3.1 percent in seasonally adjusted terms in the December quarter 2020, according to figures released by the Australian Bureau of Statistics yesterday (Wednesday).
Speaking in Canberra in the wake of the latest figures from the ABS, an ebullient Treasurer, Josh Frydenberg, said this indicated the economy had recovered 85% of its “Covid-induced fall six months earlier and twice as fast as we expected in last year’s October budget”.
“This is a very encouraging performance from the Australian economy, given the economic abyss that we were staring into at the peak of this crisis,” he noted.
Head of National Accounts at the ABS, Michael Smedes said: “The economy has continued to recover with activity increasing 3.1 percent in the December quarter following the 3.4 percent rise in September quarter.
“However, despite the two consecutive quarters of strong growth, economic activity remained 1.1 percent lower than recorded in the 2019 December quarter.”
Both he and the Treasurer emphasised that this is the first time in the over 60-year history of the National Accounts that GDP has grown by more than 3.0 percent in two consecutive quarters.
Frydenberg said the latest data showed the government’s economic recovery plan was “working”, but he acknowledged the “job is not done”.
Household spending increased 4.3 percent as Covid-19 restrictions continued to ease. Victoria recorded the strongest increase in household spending after strict lockdown restrictions were lifted.
Smedes added: “Despite growing at 10.4 percent for the quarter, household spending in Victoria was 7.2 percent below its pre-Covid level. Household spending for the rest of Australia, excluding Victoria, was 1.1 percent lower than pre-Covid levels.”
Private investment rose 3.9 percent and contributed 0.7 percentage points to growth. There were rises across both housing and business investment, with improved conditions which coincided with government initiatives, such as HomeBuilder and the expanded instant asset write-off.
Compensation of employees rose 1.5 percent as employment and hours worked increased with underlying activity in the economy. Despite this, household income fell as non-labour income declined with a reduction in government support payments. The household saving-to-income ratio remained elevated at 12.0 percent.
Favourable weather conditions contributed to a strong increase in agricultural production, reflected in a 26.8 percent increase in Agriculture, Forestry and Fishing Gross Value Added. There were flow-on positive impacts to other industries along the supply chain, including Wholesale Trade and Transport, Postal and Warehousing, which rose 3.6 percent and 6.1 percent respectively.
“There are challenges ahead – but you wouldn’t want to be in any other country but Australia as we begin 2021,” Frydenberg said.