Economy back to pre-COVID size by June

Blockbuster growth over three months to September has put economy on course to regain its pre-pandemic size by middle of next year.

Scott Morrison says there will be many phases to the recovery and that some businesses will remain affected by the pandemic for longer than others. Picture: Gary Ramage

Blockbuster growth over the three months to September has put the economy on course to ­regain its pre-pandemic size by the middle of next year — six months earlier than anticipated by the Reserve Bank and ­Treasury.

The Australian’s analysis of updated CBA growth forecasts in the wake of Wednesday’s ­national accounts figures — which revealed national output jumped by 3.3 per cent over the quarter — shows real GDP will reach $497.4bn in the June quarter of 2021, eclipsing the $496.9bn recorded in December 2019.

CBA head of Australian economics Gareth Aird said he ­expected the economy to grow by 2 per cent over the final three months of the year, as Victoria reopened for business, state borders were opened and confidence grew. Mr Aird said quarterly growth would slow to 1.1 per cent over the March quarter before ­accelerating to 1.3 per cent over the three months to June.

 

Josh Frydenberg and Reserve Bank governor Philip Lowe on Wednesday repeated forecasts for the economy to regain its pre-pandemic size by the end of next year. But the surprising pace of the recovery will trigger upgrades from both Treasury and the RBA, Mr Aird said.

Based on the RBA’s published estimates for 4 per cent growth in 2021, the economy would need to grow by just 0.2 per cent — or a tenth of CBA’s forecast — in order for the country to only regain its pre-COVID level of output by December next year.

Mr Aird said the economy now looked well positioned to navigate the winding back of tens of billions of dollars in income support by March next year, when the slimmed down JobKeeper and JobSeeker payments are due to expire.

Scott Morrison on Thursday repeated that the national ­accounts figures showed the broad post-pandemic national ­recovery was under way, but said the rebound had not reached every business and household.

“There are parts of the economy which will remain more COVID-affected than others. But the way you deal with that is by becoming more bespoke, by becoming more targeted,” he said.

The Prime Minister acknowledged that the next “phase” of the recovery would be when the wage subsidy and boosted unemployment benefit ended. “We’re only in this phase. We will go through another gear change in the first quarter of next year. We’ll go through another one after. But our economic road to recovery here is well under way.”