Wednesday’s national accounts were released against the backdrop of devastating floods at home and violent conflict abroad.
Our deepest condolences go to those families who have lost loved ones in the New South Wales and Queensland floods and the many who have seen extensive damage to their homes and businesses.
Our prayers too are with 44 million Ukrainians who are bravely defending their nation against the unjust and unprovoked invasion by Russia.
We are all invested in this fight, because at stake is more than the sovereignty of a single nation, but the future of the liberal democratic rules-based international order.
To different extents and in different ways, both the floods and developments in Ukraine will impact our economy.
However, the national accounts demonstrate the enormous strength and resilience of our economy, even in the face of the biggest economic shock since the Great Depression.
In the December quarter, Australia’s economy grew by 3.4 per cent, the equal strongest quarterly growth in 46 years, with Victoria’s economy growing by 3.7 per cent in the quarter.
This helped take Australia’s calendar year growth for 2021 to 4.7 per cent.
Australia’s economy is now 3.4 per cent bigger than it was going into the pandemic, outperforming all major advanced economies including the United States, the United Kingdom, Canada, Germany, France, Italy and Japan.
Australians are world beaters. We have one of the highest vaccination rates in the world, lowest mortality rates in the world and one of the strongest economic recoveries in the world.
This is no accident, this is not the result of good luck, but a testament to the incredible achievement of 26 million Australians and an economic plan that is working.
There are now more Australians in work today than before the pandemic, with our labour market again outperforming every major advanced economy in the world.
In stark contrast to the US, UK, Japan, Germany and Italy, where employment is still well below pre-pandemic levels.
In the national accounts we saw consumption growth rebound strongly by 6.3 per cent as Victoria and New South Wales emerged out of lockdown.
Consumption was up in 12 out of 17 categories, with significant increases in transport, hospitality and retail. This was underpinned by the creation of a record 375,000 jobs in the quarter, as unemployment fell from 5.2 per cent in October to a 13 year low of 4.2 per cent in December.
Consumption was also supported by a fall in the savings ratio to 13.6 per cent from 19.8 per cent in the previous quarter.
Household balance sheets remain particularly strong with the accumulation of more than $250bn that was not there at the start of the pandemic.
The wages bill of the economy otherwise known as compensation of employees, grew by 2 per cent in the quarter and is up by 5.3 per cent through the year.
This has been driven by both strong employment but also an increase average earnings in the quarter, reflecting a tight labour market and greater competition for workers.
The national accounts measure of earnings is broader measure of remuneration for workers and was up 3.4 per cent through the year.
Off the back of a bumper harvest, in wheat, barley and canola, farm GDP was up by more than 11 per cent in the quarter and is now up more than 20 per cent through the year.
This saw higher inventories which contributed strongly to growth.
Global supply chain constraints did have a negative impact on the quarter, effecting dwelling investment, business investment and net exports.
However, the pipeline of construction remains strong, so too investment intentions with the latest CAPEX survey indicating more than 12 per cent growth this financial year.
Despite the uncertainties in the global outlook and the impacts of the pandemic, the Australian economy is in a very strong position.
Omicron has not derailed our recovery.
Spending data for the first two months of this year is up 4 per cent on the equivalent period last year, business confidence rebounded in January across all states and job ads remain more than 30 per cent higher than pre-pandemic levels.
The unemployment rate is forecast to have a three in front of it for the first time in nearly 50 years, with Australia avoiding the labour market scarring experienced during the recessions of the 1980s and 90s.
As recent events at home and abroad demonstrate, the Australian economy will continue to be tested but Wednesday’s national accounts show that if we stick to our economic plan, Australians can be confident about their economic future.
Published in The Herald Sun
