GDP in detail: Households drive strong rebound

The Australian Bureau of Statistics (ABS) today released the national accounts for the September quarter, which registered a 3.3% rebound in real GDP over the quarter with GDP falling 3.8% through the year.

On a per capita basis, real GDP rose by 3.2% over the quarter and was down 4.7% over the year.

The seasonally adjusted GDP rebound was driven by household consumption expenditure, which contributed 4.0% to growth:

The next chart shows the rebound in Q3 GDP against the record 7.0% contraction in June:

Despite the rebound, Australia’s real GDP remains 4.2% below its December 2019 peak, whereas GDP per capita remains 4.8% lower:

Quarterly final demand, which excludes export volumes, rebounded by 7.4% over the September quarter, with all jurisdictions except locked-down Victoria experiencing rebounds:

However, in the year to September 2020, final demand fell by 3.5% nationally, led by the two biggest states:

The terms-of-trade rose by 0.7% over the quarter in seasonally adjusted terms:

Accordingly, the terms-of-trade supported national disposable income, which rose by 4.8% in per capita terms, but remains 4.5% below its September 2020 peak:

Moreover, nominal GDP growth rebounded by 3.7% over the quarter but remained 4.0% below its March 2020 peak:

Average compensation of employees rose by 0.4% in the September quarter in nominal terms and was up 4.0% over the year:

However, this was impacted by the sharp contraction in the number of lower paid workers employed, which has pushed up the average.

Real GDP per hour worked (i.e. labour productivity) retraced as employees returned to the workplace. It fell 1.1% over the September quarter but was up by 3.1% over the year:

The household savings ratio also retraced by 3.2% to 18.9%, but remains near the highest levels recorded since the 1970s:

Finally, the next chart shows how government borrowing (stimulus) has helped offset the rise in savings by households:

In summary, after the Australian economy entered its first ‘technical recession’ since the early 1990s, the economy recovered nicely in Q3 with the exception of locked-down Victoria.

With Victoria now also out of lockdown, we should see further solid recovery in Q4 and through 2021; although there is still a long way to go until Australia’s GDP recovers the output lost since December 2019.

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