Australian economic growth recovers strongly in Q3 2020

The economic growth in Australia recovered strongly in the third quarter of this year. On a quarter-on-quarter basis, the economy grew 3.3 percent, following the contraction of 7 percent recorded in the second quarter. The 3.3 percent growth was above market expectations, and also above the projections suggested in the central bank’s recent Monetary Policy statement.

The overall result was weighed on by the lockdown in Victoria’ however, stellar recoveries in activity in other states provided bigger offsets. The focus will now be on the December quarter, where the partial economic data imply that the economy is weathering the substantial withdrawal of fiscal stimulus remarkably well, noted ANZ in a research report. The opening up of the Melbourne economy is clearly helping, with ANZ card data indicating that consumer spending has increased sharply in Victoria. State border openings are expected to help at the margin. The rebound appears to have strong momentum presently, although there are likely to be some speed-bumps in the road ahead, stated ANZ.

Government stimulus has evidently aided in underpinning incomes and spending. Support for households has been quite solid, but the impact of the stimulus is most apparent on profits, with the profit share increasing to a fresh record high.

“GDP is back in positive territory, but it is too early to say the economy is out of recession. With 17.4 percent of the labour force unemployed or working fewer hours than they would like, it will be some time before we can be confident that the economy is out of the woods”, added ANZ.