GDP rise may save economy from a double dip recession but scars will be revealed

While the economy has likely escaped fears of a double dip recession following the release of June quarter GDP figures which unveiled a 0.7 per cent rise, the ramifications from extended lockdowns will see a staggering fall activity that will hit small businesses from the huge drop in consumer spending.

Treasurer Josh Frydenberg flagged June's results had shown the resilience of the economy in wake of short lockdowns, but warned a pull back in the September quarter will occur from the mass shutdown in the south east of the country.

"Despite the difficulties that we face, our economy will bounce back," Mr Frydenberg said on Wednesday.

"[Wednesday's] national accounts provide confidence that our recovery will get back underway once restrictions are eased."

But the question on the minds of economists is how much of a dent Delta will have on the economy in the current quarter?

NAB chief economist Alan Oster has flagged the swing backward could be as much as 4 percentage points, which would make GDP fall to around minus 3.5 per cent.

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Treasury is estimating the drop will be around the 2 per cent mark and would likely be impacted by lower household consumption and falls in exports and investment.

Westpac has also provided its September GDP projections, with a contraction of 2.6 per cent.

ANZ economist Felicity Emmett in her reaction to the national account figures, raised prospects the federal government may be forced to inject more fiscal stimulus into the economy to ensure the recovery is underway by 2022.

"Uncertainties around the outlook have increased," Ms Emmett said.

"Further fiscal policy stimulus is likely to be required to underpin a strong recovery next year, and the RBA still has the option to defer the timing of its tapering."

Treasury has already ramped up fiscal support for businesses and workers at a stand still because lockdowns, through COVID-19 disaster payments and business support grants which are partially funded by state and territory governments.

Eyes will also turn towards the Reserve Bank, as to whether its current road map to taper its huge monetary support during the pandemic will be delayed in response to the contraction expected in the next round of figures.

While speculation around the September quarter will continue to brew, what economists and governments can agree on, is the only way out of the shroud of the uncertainty is to meet vaccination targets on time.

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