Last week’s GDP data hides a funny quirk.
So the Aussie GDP data was out last week and it was a bit of a funny one.
Seems the government wasted a lot of money on vaccines nobody wanted, and that gave GDP a boost that nobody saw coming.
No, on the whole, the results were ok, in that the economy didn’t go backwards as some people were expecting.
At 0.7% in the quarter, it surprised to the upside.
But that also tells you how far expectations had fallen. Three months ago everyone was gearing up for the long-boom.
With over half the country in lockdown, those happy days are gone.
And the September quarter, which we’re living through right now, is probably going to be a bit of a shocker.
But for the meantime, the data still tells a happy story. GDP is still 1.6% higher than it was pre-Covid. We’re still making ground.
And it tells a story of an economy in a relatively strong position, entering a very challenging period.
Most analysts seem to think we’ll drop big-time in September, but then get back on track by December.
But the key stand-outs from the latest release for me are:
Vaccine hesitancy saved the economy
Of the 0.7ppts of growth, 0.5pppts came from “other inventories”.
Of that, 0.35ppts came from public authorities, which is most likely the stock-piling of vaccines and other medical supplies.
We might have piles of vaccines that people don’t want, but it gave us a good growth number in the quarter.
The infrastructure boom continues
There was a 7.4% surge in public infrastructure spending, driven by state and local governments, which by itself accounted for more than half of the growth in quarterly GDP.
A 1.3% increase in other government spending accounted for the other half, which had a focus on health and stimulus.
Businesses are still booming
Business investment was up a strong 2.3% in the quarter. Business conditions are still bully. The June half earnings reporting season saw listed company profits rise nearly 50% last financial year, with 75% of companies seeing profits up.
But the big positive was a huge return of capital to shareholders – with 89% of companies raising or maintaining dividends driving a record dividend payout of nearly $40bn and over $20bn in buybacks.
It’s a good to be in, or own, business.
Households are still flush
With the economy largely lockdown free during the June quarter, household spending jumped 1.1% in the quarter, with domestic tourism up 28%!
The savings ratio fell, back towards more normal levels (although this was more about household incomes being stronger than expected than it was about households saving more.
Whatever the case, a long period of above-average saving has left Australian households with a savings warchest of around $200 billion! The latest data shows that $25bn was added in June alone.
The big question that everyone wants to know, is what are households going to do with all this money once the economy opens up again?
So on the whole, the picture that emerges is one of an economy doing pretty well, and set up as well as you could hope for, going in to lockdowns.
But how things play out from here?
That’s still anybody’s guess.