A 1.8% gain for the March quarter and an annual increase of 1.1% means the Australian economy is now larger than it was before COVID 19 hit.
Fig1
This has been an outstanding achievement for the Federal government and public policy makers. The stimulus support for the economy during long periods of lock down has worked. This can be seen with the wind down of programs such as JobKeeper at the end of March being replaced by Household Consumption and Business Investment which has taken up the reins.
Fig2
Programs such as JobKeeper have declined from a peak of some $35.7 billion in Sep 2020 to $6.4 billion in March 2021. The uptick in Household spending has been equally dramatic. Improving from a low of $235 billion in June 2020 to just below the pre COVID levels at $268 billion in March.
Fig3
Unsurprisingly, as Household Income has not changed greatly, this increase in consumption has been driven by a change in household savings. This peaked at 22% in June 2020 and has now declined to 11.6% in March 2021.
Fig4
The final part of the jigsaw is Business Investment which has improved from a low of $80.9 billion in June 2020 to be above pre COVID levels at $88.9 billion in March.
Fig5
There are clearly many challenges ahead as the recovery for sectors directly impacted by lockdowns such as tourism and hospitality will be patchy. In addition, the university sector faces many complications in servicing overseas students. Progress for these sectors will be heavily dependent upon the eventual opening of international borders which in turn will be linked to progress on the vaccine roll out.
