Deloitte Access Economics: National Accounts the eye of the storm

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Deloitte Access Economics: National Accounts the eye of the storm

2 September 2021: Today’s National Accounts release highlights the roller-coaster that has been the COVID pandemic to date. The economy grew 0.7% through the June quarter, to now be 1.6% larger than pre-pandemic levels.

But the data also reflects what happened more than three months ago, when lockdowns were rarer and shorter. The situation today looks very different.

Deloitte Access Economics partner, Stephen Smith, said: “The data reflects a bumper period for Australia. But the same can’t be said for today.

“The June quarter was the eye of the storm, with just 7% of the population locked down on any given day across the period. Since then, that share has averaged close to 45%, and we’re seeing the impacts of that flow through to businesses and jobs.

“As things currently stand, that suggests we could see the economy shrink in the September quarter by more than 4%.”

Share of Australians in lockdown
Source: RBA, Deloitte Access Economics

Deloitte Access Economics Senior Economist, Harry Murphy Cruise, said attention needed to turn to how Australia recovers from the latest lockdowns.

“We need to think about how we drive our recovery from lockdown. While our bounce back last year was driven by an injection of dollars, this recovery will be driven by injections of vaccines. And with supply finally catching up to demand, the pace of vaccinations is ramping up quickly. That should see us reaching 80% of the 16+ population vaccinated in the coming months,” he said.

“But we should aim even higher. Vaccinations are Australia’s ticket out of COVID. And so with hesitancy tracking down, Australians should be eyeing the title of the most vaccinated country in the region.”

Smith said that an uptick in vaccinations, however, doesn’t mean Australia is getting out of the woods just yet.

“There’s still a very real chance that Australia has already entered its second recession within 24 months given the significant lockdowns in the September quarter and the likely ongoing impact into the December quarter,” he said.

“But whether we do or don’t is a moot point – recessions are just definitional, while lockdowns, and the pain they inflict on many people, are reality. And so we should think about how we support those Australians doing it tough.

“Lockdowns hurt jobs, and now that the Coronavirus Supplement has been removed, those that do lose employment are moving onto unemployment benefits that are just half of what they were last year during similar lockdowns.

“Supporting these Australians is not just the right thing to do but will provide a much-needed boost of dollars flowing through the economy when Australia’s two most populous states reopen.”

Murphy Cruise said there was still some good news in today’s release.

“Green shoots are appearing for businesses, with actual and planned investment rising. But there’s no guarantee this will continue, with lockdowns generally stifling investment. And so encouraging businesses to keep spending will be vital over the next 12 months,” he said.

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