CANBERRA, AAP – Robust consumer spending in the final months of 2020 as COVID-19 restrictions were lifted is expected to result in another strong economic growth result when the national accounts are released.
Economists expect the report, due on Wednesday, will show the economy expanded by around 2.5 per cent in the December quarter, building on the sharp 3.3 per cent rebound three months earlier.
This follows the seven per cent slump in the June quarter, which marked the first recession since the early 1990s due to the impact of the COVID-19 pandemic.
“The national accounts will confirm a sizeable bounce in activity associated with the reopening of the economy as COVID related restrictions were eased, with Victoria emerging from its second lock-down,” Westpac senior economist Andrew Hanlan said.
Still, the impact of the downturn will linger on, with the annual rate remaining in negative territory at around a 1.8 per cent contraction.
“An expected rebound in GDP will be welcome but unsurprising given the re-opening of Victoria around that time,” shadow treasurer Jim Chalmers told AAP.
“It won’t be enough to recover all the ground lost during the recession or to ensure people aren’t left behind.”
Along with household spending, a lift in home building, business investment and government spending will add to the buoyant result.
However, exports will be a minor drag on the result as imports outperformed with businesses re-stocking after the lockdowns across the nation.
Even then, the 0.1 percentage point contraction in data released on Tuesday was smaller than economists had forecast.
Reserve Bank governor Philip Lowe, following Tuesday’s monthly board meeting, said the economic recovery was well under way and had been stronger than earlier expected.
The central bank left the cash rate and its other key rates at a record low 0.1 per cent, while committing to further bond purchases aimed at keeping market interest rates and borrowing costs low.
Interest rates, or yields, on global bond markets have risen sharply recently in anticipation of a rapid recovery from the COVID-19-induced recession fuelling inflation.
However, Dr Lowe has reiterated the board will not raise interest rates until inflation is sustainably between two and three per cent, something he does not expect to occur until 2024 at the earliest.