Covid-19: A promise of recovery on the other side of Delta

Treasurer Josh Frydenberg in Canberra on Wednesday. Picture: Martin Ollman

The June quarter national accounts show how good life was before the Delta variant came along and locked the bulk of the population into their homes.

More than that, the 0.7 per cent lift in real GDP over the three months has given Josh Frydenberg another reason to be confident that households and businesses will bounce back once lockdowns end.

The ABS figures showed a sharp deceleration from the previous quarter’s 1.8 per cent lift, but the breakneck speed since last year’s recession was never going to be maintained.

More important was the fact that even stop-start restrictions through the quarter – Deloitte calculates that 7 per cent of the population was locked down on any given day in the three months – couldn’t stop businesses investing and Australians spending.

Households were confident enough to dip into their massive cash reserves, although the savings ratio is still almost double pre-pandemic levels.

The end of JobKeeper provided no obvious handbrake to growth, as state and local authorities ploughed money into rail and road projects, further bolstered by big dollars committed to rolling out the vaccine, and all the quarantining, tracking and tracing.

The 0.7 per cent lift in real GDP was the more remarkable given that a drop in mining export volumes slashed one percentage point off growth – imagine the headline figure had bad weather not held up iron ore shipments.

The question, of course, is what’s next. Deloitte calculates that since the middle of the year, the share of Australians under lockdown on any given day has jumped to 45 per cent, and it’s closer to 60 per cent now.

The Treasurer said the official view is that the economy will contract by more than 2 per cent in the September quarter – some bank economists expect the hit to be twice as much.

The exact depth of the hole Delta gouges in the economy matters, but not nearly as much as how long it lasts. The June quarter national accounts add weight to the argument that we can bounce back from the artificial downturns triggered by lockdowns, even if we may not get the “snap back” of 2020 as we learn to live with some level of Covid in the community.

There will be no recovery if we don’t open back up once vaccination rates reach Doherty thresholds. That was hammered home by Frydenberg. The June quarter national accounts are a promise of recovery on the other side of Delta.