Australia: Economy forecast to contract 3.0% in 2020 – UOB

Economist at UOB Group Lee Sue Ann assesses the latest GDP figures in the Australian economy.

Key Quotes

“The Australia economy rose 3.3% q/q in the third quarter, as COVID-19 related restrictions eased across most states and territories. This follows the record 7.0% q/q decline in the second quarter. Whilst there was an improvement in 3Q20 GDP, the level of activity in the economy remained lower than prior to the pandemic, reflected in a 3.8% y/y decline.”

“In the details, domestic final demand contributed 4.3ppts to the q/q GDP growth. Household final consumption expenditure contributed 4.0ppts, as restrictions were lifted for households and businesses. Public demand contributed a further 0.3ppts… Reductions in COVID-19 case numbers led to the relaxing of social distancing measures and other restrictions, encouraging spending on services which rose 9.8% q/q… Spending on health services recovered as deferred elective surgeries and visits to medical practitioners resumed. Spending on goods increased 5.2% q/q in 3Q and is up 3.5% y/y through the year.”

“Looking ahead, the end of Victoria's second lock-down and success in containing the virus domestically will likely support a further rebound in activity in 4Q20. We expect another sizeable increase in the December quarter (around 2.0% q/q, -3.8% y/y), which should take full-year 2020 GDP to -3.0%, before a moderate recovery in 2021 to 2.8%.”