02/12/2020 - 09:00

Consumers drive WA recovery

02/12/2020 - 09:00

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Household spending rocketed up 11.7 per cent in WA in the September quarter, while national GDP grew 3.3 per cent.

The Australian economy has grown by 3.3 per cent in the September quarter. Photo: Gabriel Oliveira

Household spending rocketed up 11.7 per cent in Western Australia in the September quarter, while national GDP grew 3.3 per cent.

The big lift in consumer spending was the highest in Australia, and above the national average of 7.9 per cent, all seasonally adjusted, according to the Australian Bureau of Statistics.

But business investment in WA fell, down 2.1 per cent, while Victoria, Tasmania and the ACT all posted drops on this measure.

Government investment, mostly infrastructure spending, fell 2.6 per cent, with only Victoria fairing worse.

The numbers indicate that despite claims about government stimulus packages at both the state and federal level, they did not flow through in WA in September.

WA’s domestic recovery was driven by consumers.

State final demand grew 4.9 per cent, middle of the range among states.

It’s important to note that all of that State Final Demand numbers do not include trade data, which is not published at a state level today.

Nationally, growth of 3.3 per cent was low compared to most other major economies, according to Deloitte data.

However, Australia also had a much lower drop in GDP in June.

“The fact that we took a far smaller upfront hit than most means that Australia is so far suffering from fewer scars than other nations, and our path back towards ‘normal’ looks set to be less fraught,” Deloitte said in a briefing note.

“Yet there’s a long way to go.

”Even with the record rebound announced today, Australia’s economy is still 4.2 per cent smaller than it was in the December quarter of 2019. 

“And we’d have ordinarily kept growing, which is why our economy is 6.4 per cent smaller today than the Reserve Bank had expected it to be in its pre-COVID forecasts.”

Commsec chief economist Craig James said consumer confidence was at seven-year highs, the unemployment rate was better than expected at 7 per cent, house approvals were at 20-year highs, and retail spending up 7.3 per cent nationally compared to a year ago.

“We expect the economy to rebound 4.2 per cent in 2021 after contracting 3.3 per cent in 2020,” Mr James said. 

“Social distancing needs to be maintained, the virus must be suppressed and people need to have confidence to return to work, shops and entertainment venues. 

“Vaccine developments are also critical to the outlook

“We retain our hope that the jobless rate has already peaked at 7.5 per cent.

“But the jobless rate will likely remain elevated, holding broadly around six to seven per cent over most of the coming year, easing to around 5.75 per cent in a year’s time.”  

McGowan bullish on recovery

Today’s data comes at the same time as Premier Mark McGowan affirmed his support for eliminating rather than suppressing COVID-19 in WA, arguing that strategy has saved the state from recession.

Addressing a Committee for Economic Development of Australia event this afternoon, Mr McGowan said that, unlike Victoria or NSW, WA's strategy had altogether stopped the state from entering recession.

He cited today's data as proof the state government had chosen the most logical path for tackling the virus.

“It’s better not to have the virus than to have it,” he said.

“The existence of a highly contagious virus in the community means there is always a time bomb for an outbreak in an aged care home, in a remote aboriginal community [or] in a mining camp.

“It fuels uncertainty and risk.

“Not having community transmission means you have a different set of policy challenges and opportunities.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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