GDP data shows us that there’s still an awful lot of money in the economy.
So blink and you would have missed it, but we got news that the Aussie economy is still powering along last week.
Normally, the GDP data gets a lot of coverage. Last week though, between the war in Ukraine and floods along the east coast, it barely rated a mention.
But there’s a couple of big things that jump out for me.
So we got a 3.4% rise in quarter, which would be historically massive, but then it did follow a massive 1.9% fall in the previous quarter.
Basically, Covid and lockdowns have GDP bouncing around like a yo-yo.
But if you cut through it all, GDP is now 3.4% above where it was pre-Covid, and growing at a pace of 4.2% per annum.
You can think about 3% growth being about ‘trend’, so 4.2% is pretty hot.
The Aussie economy, despite Omicron, despite lockdown, despite war in Ukraine, is powering along.
Go you good thing.
But the thing that jumps out at me is just how much Aussies are saving.
Even though people are spending – consumption was up a massive 6.3% in the quarter, they’re still tucking an awful lot of money away.
The savings ratio remains at one of the highest levels on record.
I do think lock-down has a lot to do with this. It’s just easy to save money when you’re locked down at home.
But still, we’re talking about a phenomenal amount of money bulking out people’s wallets.
Over the seven quarters since the pandemic began, Australia’s households have banked an incredible $372 billion – a massive increase from the $132 billion saved in the seven quarters prior:
That’s a massive warchest households have to work with.
And what are they going to do with it.
They could just hang on to it, though that doesn’t seem all that likely.
Or they could go out and spend it – which would drive consumption spending even higher, and in turn, supercharge the economy.
Or they could invest it, pumping into shares and property – which to me seems like the most likely story.
So we’ll have to see.
But it seems likely to me that when households open up their wallets, it’s going to have a huge impact on the economy and on Aussie asset markets.
It’s the warchest effect.
Watch out for it.
JG
Thokoza Hadebe says
Indeed, I like this blog. It’s an eye opener. I wasn’t aware of the unleashed potential that adversity like pandemic and omicron could paradoxically create such opportunities. Thank you