We have not completely dodged a bullet, but we have avoided a rout. Dr Brendan Rynne on September quarter GDP figures

The Australian economy continues to surprise on the upside with its resilience. We may not have completely dodged a bullet in the September quarter but we avoided a rout.

It is testament to good handling of the COVID crisis – government support to businesses and individuals during the September quarter lockdowns has helped significantly minimise disruption to the GDP figures. A 1.9 percent decline was below what the market expected.

As you would expect, household consumption is down but nowhere near as much as the June quarter 2020 when COVID started – people have got used to it and have the right perspective. Government consumption also helped fill the gap and stabilise the figures, as did household investment in dwellings and renovations.

There was a return to high levels of savings, supported by government assistance to individuals but we are now seeing a big uptick in retail sales and spending. It is encouraging to see net exports making a large contribution – a $6bn positive swing helped to minimise the expected economic shock this quarter.

Another positive sign is in compensation to employees – incomes are up, now nearly to 5 percent for the year. Profitability held up including for the small business sector which is vital to the economy. While business capex was weak, which also was expected given the lockdowns, non-dwelling construction held up despite the restrictions on construction activity in Sydney and Melbourne.

Another feature of the national accounts data was the big swing in inventory; which shows production slowed during the quarter and stocks was left to run down. As expected high human contact economic activities, like food and accommodation, recreation, and personal services, all declined dramatically.

Overall, the figures are nowhere near as bad as some had forecast, and reinforce the underlying strength and resilience of the Australian economy.

The current caveat is Omicron – we can only hope that doesn’t put a major dampener on the December quarter. But as long the borders don’t stay closed for too long – and Santa has his vaccine passport – then current data suggests that the only way is up for the economy in the run-up to Christmas and into 2022.


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