Pain in the national accounts is less than feared – and it’s old news

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Pain in the national accounts is less than feared – and it’s old news

1 December 2021:  The pain when COVID first hit saw the Australian economy drop to being 8% smaller than Deloitte Access Economics’ pre-COVID forecasts for it. 

The nation was recovering really rapidly when Delta’s dawn rocked us, with today’s data showing we fell back to being 4% smaller than our pre-COVID forecasts (as seen in the chart below).

Size of the Australian economy relative to our pre-COVID forecasts

Source: ABS, Deloitte Access Economics.

The good news is that the latest hit to the economy was a fraction of the initial pain, and that there’s already another rapid rebound underway.

Today’s national accounts tell us what was happening across July, August and September, but we already know enough about what happened in October to be confident of the current rebound:

  • Retail sales in October were already back where they were in May 2021, before Delta hit. Even better, that means they are 12% above where they were in February 2020.
  • And there’s a similar story in jobs, where payroll data shows jobs also back at their May 2021 peak by end October, leaving them almost 4% above where they were in mid-March 2020.

And the exact same patterns are seen at the state level. That latest national accounts data shows the biggest pain concentrated in NSW (where lockdowns began earlier), Victoria, and the ACT (as seen in the following chart). But again both retail spending and payroll data on jobs show those same states also leading the rebound during October.

September quarter change in state final demand

As Deloitte partner Chris Richardson notes: “The national accounts make for good fish and chip wrapping paper. They’re old news. The recovery from Delta has been even faster than our recovery through to mid-2021.

“Australian families and businesses are getting better at juggling COVID. The pain this time around was less, and the recovery looks set to be even faster.”

When the next national accounts are released in early March, they’ll show an impressive recovery. Deloitte Access Economics’ early forecast is that we’ll claw back a gain of 2.0% after today’s news of a 1.9% setback in the Australian economy.

Yet Deloitte has said for some time that “The best investment the rich world can make right now is helping the poor world get vaccinated.”

Deloitte Access Economics Senior Economist, Harry Murphy Cruise, said: “The Omicron strain highlights that the greatest risk to the recovery remains the virus.

“Uncertainty is again front of mind for families and businesses. That has the potential to see investments delayed and discretionary spending reined in. But the good news is that the world is far better prepared for this than it was two years ago. So while this is a hurdle in our recovery, it won’t be a complete roadblock.”

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Simon Rushton
Corporate Affairs & Communications
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