Australia’s economy grew over the June quarter, but lockdowns will bite

Australia’s economy bounced back from the COVID recession, with national growth rising 9.6 per cent over the year to June.

The nation’s economy rose 0.7 per cent in the June quarter, according to Australian Bureau of Statistics (ABS) data, compared with a 1.9 per cent increase in the first three months of the year.

The figures for the three months to June do not give the full picture of the economy suffering from long lockdowns in Australia’s two biggest cities of Sydney and Melbourne, as well as shorter snap lockdowns in some other states.

The figures beat economists expectations.

A Reuters poll of economists had predicted that the economy would grow by 0.5 per cent in the June quarter, compared with the previous quarter.

Impact of lockdowns will show in September figures

BIS Oxford Economics chief economist Dr Sarah Hunter said the data was “inherently backward-looking”.

“This is particularly true at the moment given the ongoing lockdowns in NSW, Victoria and the ACT,” Dr Hunter said.

She said assuming the vaccination rollout continued at its current pace, “it is likely that the eastern states will begin to re-open in the December quarter, and this will enable the economy to recover”.

“But the shift to a new COVID-normal, where there are persistent cases within the community, will make some people cautious; the recovery this time around will be drawn out into 2022,” she said.

While Australia may have avoided a technical recession, for those out of work, it definitely feels like a downturn.

In Melbourne, Kate Forsyth is worried her business, and others in the events industry, won’t bounce back as quickly this time around.

“Before, when there might have been some quite desperation amongst business owners and people in general, [this time] it’s become very difficult for people… they’re just very exhausted by the whole thing.”

Ms Forsyth’s business provides furniture hire and event styling and design, particularly for weddings, and she’s seeing the enthusiasm of her clients waning after having to rebook several times.

“There’s only so many peak dates and you can’t be everywhere at once.

“That also means that we’re going to get to the point where we can’t rebook all these events, too.”

Rebooking clients who paid their deposits months, or now even a year or more, ago means little new cash flow coming in.

To remain viable, Ms Forsyth has let her casual staff go, as well as one of her part-time employees, while drastically cutting the hours of others and doing more work herself, during what was planned to be her maternity leave.

“There’s just a very quickly mounting pile of risks associated with running this type of business at the moment,” she said.

‘Income is down, it’s very very hard’

Atom Namkhantee runs a Thai restaurant in Sydney’s inner west.

He says operating for takeaway only is a way to keep staff employed and continue marketing his restaurant, rather than making a profit.

“Costs are up in many, many ways — the fresh ingredients, or we bring in from overseas dry foods,” Mr Namkhantee said.

“But we could not put any prices up at the moment… your income is down, it’s very, very hard.”

He’s seen several shops and restaurants on the popular strip he’s operated on for 15 years shut in recent months.

“Our very close friend, the Vietnamese shop just next to us… they just came and said goodbye, and said OK we need to go,” he said.

“The other Thai, they shut down without any notice.”

Even for his own business, he feels an extended lockdown could be the final straw.

However, he wants to keep the business running to pass on to “the next generation of Atom Thai”, his staff who have worked with him for many years and whom he’s training to take over.

He’s confident that when restrictions ease, people will flock back to dining out as they did after previous lockdowns, especially if the state government were to offer vouchers like the NSW Dine and Discover program.

Beauty therapist Steffy Shome moved from Queensland to Sydney last month, expecting the lockdown to be short-lived.

With her industry shut, she’s been unable to find work.

“I haven’t seen any jobs listed for a beauty therapist, obviously not at the moment, but even for the future,” she says.

Demonstrating the different fortunes in different states, her friends in Queensland have kept their jobs, with only a few brief disruptions.

She’s now without work and unable to access JobSeeker, as she’s a temporary resident, who moved here from New Caledonia six years ago.

“It’s been a long time, I do feel like I belong here, but it’s just I cannot have any help, any support from the government.”

That means money is tight, as she relies on family support from overseas and “side hustles” such as selling her photography online and completing paid surveys.

“I’m on a very tight budget, the only thing I’m paying is rent and food, and just nothing else,” she says.

Terms of trade now at highest in history

The national accounts show Australia’s terms of trade rose 7 per cent in the quarter to reach its highest level in history.

The ABS said strong export prices for mining commodities drove the quarterly rise, and that “strength in the terms of trade contributed to a 3.2 per cent increase in nominal GDP”.

The GDP figures were also driven by a rebound in domestic demand.

Both private and public demand increased, led by household spending (+1.1 per cent) and public investment (+7.4 per cent).

But household spending was 0.3 per cent below December quarter 2019 pre-pandemic levels.

Tourism-related services (+25.4 per cent) and hotels, cafes and restaurants (+2.2 per cent) continued to rebound reflecting increased tourism activity in the quarter.

Spending on services remains below pre-pandemic levels, particularly those impacted by the ongoing closure of international borders.

Purchases of motor vehicles were also a major contributor, rising 7.5 per cent.

Household spending rose across all states over the quarter, but as the ABS noted, “stay-at-home orders in NSW commenced in late June and did not have a significant impact on spending this quarter”.

Investment in dwellings, which covered new construction and alterations and additions, rose 1.7 per cent on the quarter.

The buoyant housing market was also a key driver, with ownership transfer costs (which captures services related to buying and selling property, such as conveyancing and real estate agents) increasing by 10 per cent on the quarter.

“Overall, the increase in spending by households comfortably outstripped income growth, with the savings rate falling back to 9.7 per cent,” Dr Hunter said.

“But it remains well above pre-COVID levels (and consumer spending is still below), indicating that the recovery had further to run.”

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