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Australia s economy probably posted its second-largest contraction on record as businesses were forced to close and states sealed borders to try to contain a raging outbreak of the delta variant of coronaviruses.
In the June-to-September period, gross domestic product likely fell 2.7%, according to economists, ahead of data Wednesday. After the release of final pieces of data, they revised up their forecasts from a 2.5% drop. That would be the biggest fall since a 7% decline in April-to- June 2020, meaning the nation's two worst quarters occurred during the Pandemic.
Australia's central bank has signaled that a weak result will only be a setback and remains optimistic that a rebound in economic activity is likely, TD Securities in Singapore said.
Much will depend on the omicron variant of coronaviruses for the outlook.
There are three things to watch out for in third-quarter GDP beyond the headlines.
Income and savings: Massive fiscal support to keep households and firms solvent during the lock down is likely to have boosted incomes. With Australians stuck at home and unable to spend on big-ticket items like foreign travel, the savings rate probably jumped again, leaving consumers cashed up to fuel the recovery.
None Services spending: Economists are struggling to get a handle on services demand, as monthly retail sales data mainly covers goods. The GDP report will show how hard services were hit by restrictions that prevent large parts of the east coast from eating out, attending sporting and entertainment events, or going to hairdressers, nail spas and gyms. While consumers were largely still able to buy goods online, the services economy likely came to a halt.
There are no Labor costs: The Compensation of Employees report will reinforce existing signals in the economy that price pressures remain weak. The wages bill fell 3.1%, but the third quarter business indicators released Monday showed that the drop in the wages bill wasn't as bad as it might have been given hours worked fell 3.1%. The wage weakness was more narrowly based than during last year s lockdown. One Chemical Company is reaping the benefits after All Wildfires Are Getting Worse, and None of the Wildfires Are Getting Worse.