The Australian economy powered into this year on solid footings as the country’s households remain cashed-up to consume and a pipeline of residential construction has been established.
GDP jumped 3.1 percent last quarter from the previous quarter, when it rose an upwardly revised 3.4 percent, the Australian Bureau of Statistics said yesterday.
That was the first back-to-back expansions of more than 3 percent since quarterly records were established in 1959.
Photo: Bloomberg
Compared with a year earlier, the economy shrank 1.1 percent, while economists had forecast a 1.9 percent contraction.
The economy’s V-shape recovery is coming into sharp relief as Australian firms step up hiring, households unwind crisis-level savings and the property market gathers momentum.
Still, there is a way to go as Australia would only return to its pre-COVID-19 pandemic level of GDP in the middle of this year, with the Reserve Bank of Australia saying that monetary stimulus would be required for an extended period.
“Further reasonable growth figures seem probable as the household sector unwinds the large savings pool they accumulated during the pandemic,” ING Groep NV chief Asia Pacific economist Rob Carnell said. “Continued vaccine rollout will also help this process to play out.”
The two strong quarters of growth are a swing back from the nation’s first recession — defined locally as two consecutive quarters of contraction — in more than 28 years in the first half of last year.
The Australian government and central bank have worked closely to support the economy during the pandemic.
The central bank’s key role has been to ensure that there was plenty of low-cost credit available and to keep down government borrowing costs.
The central bank’s key interest rate and three-year yield target are at 0.10 percent, and it is running a low-cost funding facility for banks.
The central bank is also operating a A$200 billion (US$156.2 billion) quantitative easing program targeting longer-dated securities that is designed to help keep a lid on the currency.
It forecasts that the economy would expand 3.5 percent over this year and next, continuing to be led by household spending.
Meanwhile, government stimulus measures to encourage home building and renovations have helped set up a pipeline of residential construction work for this year.
The unemployment rate has steadily fallen with the economy gathering strength, dropping to 6.4 percent in January from a pandemic peak of 7.5 percent.
The government is due to end its signature wage subsidy program — JobKeeper — at the end of this month, creating pressure on jobs in industries like tourism affected by closed international borders.
“Stimulus and support measures are still very much required, and any scale-back needs to be carefully managed,” said Craig James, the chief economist at the central bank’s securities unit. “The reserve bank certainly hasn’t changed its rhetoric. Rates will remain low for another three years. Bond buying will continue. Cheap loans will remain under offer to business.”
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