Economy defies forecasts

Growth resilient despite fears

THE economy grew by a robust 0.7 per cent over the three months to June, as national activity proved more resilient than expected to stop-start lockdowns through the quarter.

National accounts figures from the Australian Bureau of Statistics revealed real gross domestic product (GDP) growth decelerated sharply from 1.8 per cent in the previous quarter, but was nowhere near contracting, as had been feared by some economists leading into Wednesday’s release.

Instead, the figures showed real GDP growth came in well above consensus forecasts of around 0.3 per cent.

The economy through the 2020-21 financial year grew by 1.1 per cent versus the previous financial year, the ABS said.

The ABS said domestic demand drove the better-thananticipated result, with household spending, private investment and public expenditure all strong, even as a fall in mining export volumes dragged.

Despite stay-at-home orders somewhere in the country on 29 days through the quarter, ABS head of national accounts Michael Smedes said “lockdowns had minimal impact on domestic demand, with fewer lockdown days and the prolonged stay at home orders in NSW only commencing later in the quarter”.

Australians also dipped into the estimated $200bn in excess cash reserves built up since the national lockdown in 2020, with the household savings ratio dropping from 11.6 per cent to a still-high 9.7 per cent.

Private demand contributed 1 percentage point to real GDP growth, the ABS said.

Household spending increased 1.1 per cent and added 0.6 percentage points to growth, driven by spending on services, which lifted 1.3 per cent “as Covid-19 restrictions continued to ease around Australia”, the ABS said.

Business investment rose 2 per cent and contributed 0.3 percentage points to growth, while dwelling investment increased for the fourth consecutive quarter, rising 1.7 per cent “reflecting continued demand since the introduction of the HomeBuilder scheme”.

It came as the latest data showed property prices moving at their fastest rate of annual growth since 1989, according to property researcher CoreLogic.

Dwelling values rose 1.5 per cent in August, which was the lowest monthly rise since January.

The August update takes Australian housing values 15.8 per cent higher over the first eight months of the year and 18.4 per cent above levels a year ago.

CoreLogic’s research director Tim Lawless said the August slowdown was likely a reflection of worsening affordability, which was more likely to be weighing on buyers than virus uncertainty.