There’s a long way to go, but today’s record rebound in the Australian economy – via the release of the latest quarterly National Accounts – is part of a heartening global trend.
The chart below compares the quarter with the largest fall in the economy versus the following quarter. For China, that is the March and June quarters. For everyone else, that is the June and September quarters.
The pain and the rebound in quarterly economic growth (%)
Source: OECD, ABS, Deloitte Access Economics.
Not surprisingly, the countries that were hit hardest when COVID hit were generally the countries that have recovered the most thereafter.
Australia’s economy contracted a (comparatively) small 7.0% in June, so it’s no surprise that our rebound (record quarterly growth of 3.3%) has also been smaller than the global average.
That’s very good news. 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.
Yet there’s a long way to go. Even with the record rebound announced today, Australia’s economy is still 4.2% 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% smaller today than the Reserve Bank had expected it to be in its pre-COVID forecasts.
Australia fares less well on that type of measure for two reasons. One was the severity of Victoria’s lockdown. The other is that the economies of most nations don’t have momentum from migrants. But Australia does – or did – have that momentum, and so the shortfall in people power is part of the wider COVID-driven shortfall in our economy.
Shortfall between the current size of the economy and pre-COVID RBA forecasts
Source: RBA, Deloitte Access Economics.
Deloitte Senior Economist Harry Murphy-Cruise noted: “The bigger they fell, the more they rebounded.
“The good news is that Australia’s economy wasn’t as hard hit as most other nations. And, with Australia’s COVID numbers extremely low, state borders opening up and vaccines on the horizon, that leaves us really well-placed.
“But the bad news is that the damage still remains deep, and that Australia still has a substantial repair task on its hands.”