Cheerful Australian exports, the temple of public spending Q3 GDP fall by Reuters

Author: Wayne Cole

SYDNEY (Reuters) – The Australian economy gained a much-needed boost in the third quarter from strong exports and government stimulus spending, which should at least offset the significant impact of coronavirus blockade activity.

Gross domestic product (GDP) is still likely to suffer the second largest contraction recorded in the last quarter, but a one-time contribution of 1.7 percentage points to trade and public spending will ease the pain somewhat.

The GDP report is due to be released on Wednesday and is forecast to fall by 2.7%, a contraction that has only been surpassed by the 7.0% drop that began after the pandemic last year.

The decline is again due to the virus, which closed the states of New South Wales and Victoria for much of the quarter and hammered consumer spending.

Fortunately, for the economy, with the government taking part in emergency aid, total public spending added to A $ 3.5 billion ($ 2.5 billion) in GDP, or 0.7 percentage points.

Australia also benefited from strong resource exports and declining import volumes, with real net exports adding 1.0 percentage point to GDP in the quarter.

The country’s current account surplus was a record $ 23.9 billion in the quarter, with exports up 8%.

The surplus would have been even higher, but Australian companies, especially miners, paid much more in dividends to foreign investors after a great season of profit.

In any case, a rapid economic recovery is already underway, as global vaccination levels have allowed most of the reductions to be removed, releasing a sustained wave of demand.

Retail sales rose 4.9% in October when stores reopened, banks say they continued in November. The CBA reported that ticket spending for the week to November 26 was 24% higher than in the same week in 2019 before the pandemic hit.

The job market has also been surprisingly resilient as payrolls rose above pre-lockout levels in October, ahead of expectations.

The emergence of the Omicron variant is a potential threat, as the government has delayed the opening of international borders for two weeks, although rules on staying at home are unlikely, as 87% of the adult population is fully vaccinated.

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