Australian GDP: Recovery just getting started
Australia’s real GDP in 3Q20 rebounded 3.3% QoQ but remains down 3.8% YoY. Key points:
- Australia’s recovery, whilst better than the expected 2.5% QoQ, substantially trailed the US’ 7.4% QoQ and -2.9% YoY and Eurozone’s 12.6% QoQ and -4.4% YoY, so the YoY declines are similar (Figure 2).
- The recovery was held-back by Victoria’s lockdown and surging imports. Victoria’s Gross State Final Demand (SFD) – a slightly different measure to GDP – fell 9.8% YoY. Ex-Victoria, SFD fell just 1.4% YoY (Figure 1). Imports resurged 6.5% QoQ, driving overall net exports to take 1.9% off GDP.
- Consumption rebounded 7.9% QoQ but remained down 6.5% YoY. Services rose 9.8% QoQ but still fell 12.1% YoY, led by Transport
(-82.2% YoY) and Hotels & Restaurants (-40.2% YoY).
- Investment was weak: Business construction fell 4.9% QoQ and 9.6% YoY, while equipment fell 3.7% QoQ and 13.0% YoY. Residential stabilised at 0.6% QoQ but fell 7.6% YoY. Inventories stabilised after rapid liquidation.
- Government spending continued at a high level: Spending rose 1.4% QoQ and 7.8% YoY, and Investment rose 0.3% QoQ and slid 0.2% YoY.
- Looking ahead, factors driving a V-recovery include: i) Re-openings and vaccine rollouts; ii) a consumer boom given recovering employment, a record 18.9% saving rate (Figure 4), tax cuts and low rates; iii) resurging investment driven by operating profit up 14.4% YoY (Figure 6), major tax incentives and strong balance sheets; iv) farm sector recovery from a 13-year low (Figure 7); and v) rebounding exports on Asia’s V-recovery.
- Early 4Q20 trends are extremely positive: October retail sales rose 7.3% YoY, vehicle sales ex-Victoria rose 9% YoY, dwelling approvals rose 14.3% YoY and business confidence rebounded to +5, up a z score of 0.8.
Download the Full Report for Investment Implications here:
By submitting your email, you understand that E. L. & C. Baillieu may use your email to invite you to investment briefings or investment webinars or for other marketing purposes. You can unsubscribe from this list at any time by clicking unsubscribe on any E. L. & C. Baillieu email you receive.