Australia’s economy grew 3.1 per cent in the December quarter but where does it go from here?

Despite a rebound in economic growth, the recession is not over. The big uncertains are what happens after JobKeeper goes and whether the COVID-19 vaccines work.

The overall economy has now made up all the ground lost in last June quarter’s shuddering, shuttering, shattering lockdown plunge.

But it’s also now just four weeks away from the end of JobKeeper when nearly 1m jobs – around one-in-every-twelve in the private sector - and the businesses that employ them will then be ‘on their own’.

That is of course, unless some sectors can persuade the prime minister and the treasurer to continue some sort of targeted jobs support.

The official GDP figures from the Australian Bureau of Statistics Wednesday showed the economy grew 3.1 per cent in the December quarter, to be almost back to – just 1.1 per cent short – of where it had been in the December quarter 2019, before ‘virus and lockdown 2020’.

The economy will grow by at least that 1.1 per cent through this current March quarter; indeed, I suggest we will do better than that, so when the March quarter numbers are in, we will clearly have passed the December 2019 quarter previous peak.

Even more strikingly, we will be nearly 10 per cent up from the June quarter recession bottom.

That is to say, we will have very strongly recovered from the worst of the recession.

But that’s not the same as saying the recession is over.

We will still have significant, too-high, jobless numbers.

We will still have battered or broken businesses. And we will have to see what happens when JobKeeper goes. Further, more fundamentally, and what matters for the longer-term, is whether the Godot vaccine - that 8 billion of us around the world have been waiting for – ‘works’.

Not just in the all-important medical sense, but in economic terms. Will we be able to take all the clamps off the economy; will we all be able to be confident we won’t be hit with lockdowns, even snap 5-day so-called ‘circuit breaker’ ones like Victoria’s last.

That was nevertheless sufficient to lop around $1bn off the state economy – and indeed perhaps as much as 0.2 per cent off the entire national economic growth rate for the March quarter.

The Australian economy grew 3.1 per cent in the December quarter.

It’s not just, though, the direct impact of a lockdown, but the way the possibility of one being thrown at businesses and jobs is so damaging to businesses and economic activity.

Only when, and an even bigger if, the vaccine takes us back to the pre-virus world, can we get at least sustained and hopefully strong economic growth.

We won’t get there on a booming property market and its spill-over into actual home building on their own.

Now, we will only find out the official March quarter numbers in early June. If we were living in China we’d find out in mid-April, when the desired number is printed.

They have the luxury of being able to print the number they want and which can reasonably be retailed to the – gullible -global China-watchers.

As I’ve been pointing out the Reserve Bank underestimated the strength of the post-lockdown rebound.

In its detailed November forecasts it predicted December quarter GDP would still be 4 per cent below the December 2019 level.

In its latest February forecasts, it halved that shortfall to 2 per cent; the actual shortfall was just 1.1 per cent.

The RBA also predicted we would only get all the way back to where we had peaked by mid-2021; we are going to do it – indeed, we have already done it – in the March quarter.

All this won’t - at least, not yet – change the RBA’s interest rate intentions discussed yesterday. Simply, keeping the short-end at 0.1 per cent and letting the long-end go where it will.

We still, further, have to get through the uncertainties of the post-JobKeeper and post-vaccine unknowns.