Australian Bureau of Statistics reports 1.9% fall in GDP as Australia's economy contracts from Delta lockdowns

Treasurer Josh Frydenberg. Picture: Dion Georgopoulos
Treasurer Josh Frydenberg. Picture: Dion Georgopoulos

Delta's damage is done but the emergence of new variants is fuelling concern Australia's economy is not yet free from the clutches of the pandemic.

Latest national account figures showed lockdowns across the south east of the country caused the economy to contract, with quarterly gross domestic product falling 1.9 per cent.

It is third largest quarterly contraction on record, however on an annual basis, GDP grew 3.9 per cent compared with one year ago.

The result was better than market expectations which was anticipating the Delta dent would hit GDP by 2.5 per cent.

On Wednesday during Treasurer Josh Frydenberg's quarterly presentation on the state of the economy, the Coalition's money man claimed "cool heads must prevail" to ensure the remainder of the pandemic is free from lockdown.

"[Wednesday's] national account numbers are very much a lockdown story," he said.

"We can and we must live with the virus and its variants. Omicron is not the first and is unlikely to be the last variant we face."

Mr Frydenberg also revealed he is in discussions with other nations about an expanded role the OECD can play in assisting vaccination rates in developing countries, where the threat of virus mutations is higher.

"When those vaccination rates are lower there is greater likelihood of not only hospitalizations, deaths and cases but also mutations of the virus as well," he said.

"It is an issue that's come up in my discussions with Janet Yellen (US Treasury Secretary) and with my Canadian, New Zealand and UK counterparts."

The Australian Bureau of Statistics noted surging exports in resources and agriculture partly offset the big falls in household consumption and demand.

Falls in the ACT were the worst in the country. Household consumption expenditure in the ACT dropped 11.1 per cent, while NSW and Victoria dropped 10.8 per cent and 5.2 per cent respectively.

The bush capital's total state final demand was a decline of 1.8 per cent and was better than the two largest lockdown states overall due to higher levels of public investment.

Labor treasury spokesman Jim Chalmers used the GDP slump to attack the Morrison government, saying Australia was the worst performing economy during the September quarter, claiming failures on hotel quarantine and the vaccine rollout were the only reason the economy moved backwards.

"This is the downturn that we didn't have to have," Dr Chalmers said.

"We can't be complacent about a recovery when we've got the omicron strain threatening and where we've got a government which has done nothing to plan for the future."

Household savings rose during the quarter, a trend that has been well documented when spending opportunities are limited by lockdowns.

Household saving to income ratio rose from 11.8 per cent to 19.8 per cent, but was off the 23.6 per cent peak seen in the 2020 June quarter.

EY chief economist Jo Masters said Australia's economic health remains well placed to rebound from lockdowns, noting recent indicators showed showed strong consumption and a continued injection of investments from both the public and private sector.

"Our playbook is pretty good," she said

"I'm pretty confident in the cyclical rebound. We only need to get 2 per cent growth in the December quarter to get the economy back to where it was pre-Delta."

This story Economy contracts due to Delta, but not as badly as feared first appeared on The Canberra Times.