Last week, the ABS published the December quarter 2021 national accounts. The data showed real GDP rising by 3.4 per cent (seasonally adjusted) over the quarter to be up 4.2 per cent over the year. That was the (joint) strongest quarterly growth rate seen since a 4.4 per cent rise recorded all the way back in the March quarter of 1976.
As had been the case in the September quarter 2020, the big jump in activity reflected an economy emerging from public health restrictions. Real output had contracted by 1.9 per cent in the September quarter of last year, with New South Wales, Victoria and the ACT all in lockdown, and the sharp bounce back in activity in the December quarter was powered by their re-opening from October 2021. The ABS also noted that the onset of the Omicron variant from mid-December 2021 ‘did not have a material impact on activity’ in the quarter.
Real GDP growth was also – overwhelmingly – powered by a surge in household consumption, which contributed 3.2 percentage points to overall growth. Household spending jumped 6.3 per cent quarter-on-quarter, with growth in spending on goods and spending on services both running at the same quarterly rate. Services spending was particularly strong for hotels, cafes and restaurants, recreation and culture, and health, while goods spending on clothing and footwear and furnishing and recreational goods also surged. The ABS said that the December quarter saw the largest increase in non-essential spending (up 14.6%) on record, with spending on personal and other services also recording their fastest quarterly growth ever. Total consumer spending is now back above pre-pandemic levels for the first time, with spending on goods almost nine per cent higher than pre-COVID levels. Spending on services, however, remains nearly four per cent down on pre-COVID levels. With overall consumption up, the household savings rate also fell over the quarter, dropping from 19.8 per cent in Q3:2021 to 13.6 per cent in Q4:2021. Although note that the latter is still considerably higher than pre-pandemic rates of saving.
Private business investment, public investment, dwelling investment, ownership transfer costs and net exports were all a drag on GDP growth in the December quarter 2021, and public consumption made no contribution, with the only other positive contribution to real GDP growth coming from an increase in inventories.
For more detail on the Q4:2021 GDP release, please see our updated GDP Chart Pack.