Today’s National Accounts confirm the enormous economic cost of lockdowns.
Around 13 million Australians were in lockdown during the September quarter, and during the September quarter the Australian economy contracted by 1.9 per cent, which was better than market expectations.
Growth remains 3.9 per cent higher through the year.
Today’s result is no surprise. It confirms what we already know.
It is the third largest quarterly contraction on record following the 6.8 fall in the June quarter last year and a 2 per cent fall in the June quarter in 1974.
Today’s National Account numbers are very much a lockdown story.
Sydney metro was in lockdown for the entire September quarter, while Melbourne metro was in lockdown for about two‑thirds of that period.
In response to these lockdowns, the Morrison Government provided very significant economic support.
We established the COVID Disaster Payments, which provided $12.9 billion to around 2.4 million Australians who lost work and we partnered with the states to provide around $13 billion in business support to those affected.
At the same time, $10.2 billion in tax relief flowed to 11.5 million Australians during the September quarter.
These were the largest tax cuts to flow in a single quarter for over two decades.
Today’s National Accounts reveal the stark difference in outcomes experienced between those jurisdictions that were in lockdown and those that were not.
The New South Wales economy contracted by 6.5 per cent, the ACT’s economy by 1.6 per cent and Victoria’s economy by 1.4 per cent. While growth in the other five states and territories continued to rise, up 1.6 per cent collectively for the quarter.
The key driver in today’s National Account numbers was the 4.8 per cent fall in household consumption, the second largest in Australia’s history.
Driven by the health restrictions, spending fell in 11 out of 17 consumption categories, including falls of more than 40 per cent in transport services and more than 20 per cent in hotels, cafes, restaurants, clothing and footwear.
With thousands of businesses forced to close their doors, new business investment declined by 1.1 per cent.
However, the outlook for business investment is strong, with the latest ABS survey implying record investment intentions across the non‑mining sector this financial year.
Dwelling investment grew by 0.1 per cent in the September quarter, its fifth quarterly rise and is 11.4 per cent higher through the year.
There is a strong pipeline of construction activity supported by programs like HomeBuilder, with 153,000 home approvals over the year to September.
New public final demand was strong, up 3 per cent in the quarter, so too was net exports which contributed a full percentage point to GDP growth.
Rural exports were up significantly, increasing by 47 per cent through the year.
Both the terms of trade and the trade surplus are now at record highs.
Turning to the income side, compensation of employees, which measures the national wage and salary bill, increased by 0.5 per cent in the quarter to be 4.7 per cent higher through the year.
Both household and business balance sheets saw improvements in this period as a result of significant policy support provided by government.
Household disposable income rose by 4.6 per cent in the quarter to be 2.9 per cent higher over the year.
Increased social assistance benefits and tax cuts contributed to this outcome.
With millions of households in lockdown, the savings ratio spiked to 19.8 per cent.
This is money that will be spent across the economy as restrictions are eased and Australians go about their daily lives.
While today’s National Accounts are a clear reminder of the heavy economic costs of lockdowns, there is good news for our economy in that the lockdowns are behind us.
Consumer spending has lifted sharply since the end of lockdowns, with retail trade up 4.9 per cent in October, and retailers reporting strong demand, with more than $5 billion spent on last week’s Black Friday sales, up 50 per cent on the previous year.
Supported by Government tax incentives, non‑mining investment is expected to reach a record level of over $100 billion this year.
This is being supported by strong business and household balance sheets, who have accumulated $370 billion that was not there when the pandemic began.
The Australian economy is recovering strongly, and nowhere is this more clearly shown than in the labour market, with 350,000 jobs coming back since the start of September.
Job ads are more than 30 per cent higher than going into the pandemic and we’re on a pathway to see unemployment at below 5 per cent for a sustained period, only the second time that has happened in some 50 years.
We have avoided the scarring of the labour market, which was so reminiscent of the recessions Australia experienced in the 1980’s and 90’s, and we are working as a Government to a clear fiscal strategy to drive unemployment to historically low levels.
There will be challenges ahead, but with vaccination rates here in Australia having risen to be among the highest in the world, we can and we must live with the virus and its variants.
Omicron is not the first and it is unlikely to be the last variant that we face.
But we must hold our nerve and cool heads must prevail.
With world leading health and economic outcomes, Australians have put themselves in a very strong, and indeed, the best possible position going into 2022.