Consumers to lead economy out of recession

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Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

 

The September quarter national accounts are expected to confirm Australia has emerged from its first recession in almost 30 years.

Economists’ growth forecasts centre on a rise of around 2.5 per cent during the September quarter, a partial recovery from the massive seven per cent contraction three months earlier.

Strong consumer spending is expected to be the main driving force behind the expansion after COVID-19 restrictions were eased.

Just 24 hours after being coy on what the national accounts figures might bring, Treasurer Josh Frydenberg threw caution to the wind, telling parliament on Tuesday the economic recovery is under way.

“The comeback is on,” he said, reiterating a similar line from Prime Minister Scott Morrison.

“We are celebrating the fact that Australia has fared better than nearly every other country in the world on both the health and economic front.”

But shadow treasurer Jim Chalmers said heralding the end of the recession would be of cold comfort for many Australians still living with the effects of the largest downturn in almost 100 years.

“Morrison and Frydenberg shouldn’t be congratulating themselves while Australians are still hurting, jobless queues are still getting longer, and with ongoing challenges around underemployment,” Dr Chalmers told AAP.

Reserve Bank governor Philip Lowe says recent data have generally been better than expected.

“This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support,” Dr Lowe said in a statement following the central bank’s final board meeting of the year.

As expected, the board left its suite of monetary policy measures unchanged having cut the cash rate, and other key rates, to a record low 0.1 per cent last month.

Dr Lowe confirmed the central bank had bought $19 billion of government bonds under its new $100 billion quantitative easing program, which aims at keeping market interest rates low and, in turn, borrowing costs down.

He reiterated that the cash rate is unlikely to rise for three years given the outlook for unemployment and inflation.

“While GDP results for the September quarter are expected to show a return to positive growth, the economy is still limping and the RBA’s accommodative stance is not only welcome but necessary,” KPMG chief economist Brendan Rynne said.

Dr Lowe will be on hand to respond to the national accounts as their release coincide with his appearance in front of the House of Representatives economics committee.

“The committee will be scrutinising the RBA’s measures in response to the COVID-19 pandemic, particularly the move to implement quantitative easing, and how these measures will help the Australian economy recover after a very difficult year,” committee chair and Liberal MP Tim Wilson said.

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