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The Australian Economy update: 12 things you need to know

The Australian Economy – December quarter 2021

  1. Australia’s economy grew during the December 2021 quarter. Gross Domestic Product (GDP) increased 3.4% in the December quarter compared to the September quarter 2021. At the end of 2021, the Australian economy was 3.4% bigger than it was before the start of the pandemic (December quarter 2019).
  2. Growth was strongest in the States most affected by Delta wave restrictions. As restrictions eased, New South Wales (6.7%), Victoria (3.7%) and the Australian Capital Territory (1.9%) saw the strongest growth in demand in the December quarter.
  3. When restrictions lifted, we shopped and went out. Household spending increased 6.3% with the largest increases in non-essential spending (14.2% – the largest increase on record). In contrast, essential spending such as housing and food, rose a moderate 1.9%.
  4. Households are wealthier than before the pandemic. Households continued to save a higher-than-usual share of their disposable income (13.6%), still above pre‑pandemic saving rates, although down from 19.8% in the September quarter 2021.
  5. Personal services grew as people got a haircut. Compared to the September quarter 2021, production surged in industries most affected by restrictions. The Air transport industry grew the fastest (56.5%), followed by accommodation and food services (26.1%). Personal and other services (including hairdressing and beauty salons) grew by 15.4%, the fastest quarterly growth ever for that industry.
  6. House building slowed slightly, while businesses are ready to invest in 2022. Investment in dwellings, including construction and alterations, fell by 2.2%, but was still 5.3% above the same time last year. Private business investment was weak, following strong growth in the earlier part of 2021. But, businesses plan to increase their investment significantly, with their expected capital expenditure for 2022‑23 growing by 10.8%.
  7. International trade slowed during the quarter. Exports of coal fell as poor weather hampered extraction. In contrast, cereal exports rose sharply thanks to favourable growing conditions. Overall total exports fell more (1.5%) than imports (0.9%).
  8. Australian governments continued to support the economy. Government income support to households was $6.9 billion above pre-pandemic levels, down $4.8 billion compared to September while Government subsidies were $8.8 billion higher than pre-pandemic levels.
  9. Australian labour market remained resilient. In December 2021 the unemployment rate was 4.2%, the lowest since August 2008. The unemployment rate was lowest in Western Australia, South Australia and Tasmania. More than 13 million people were employed across the country.
  10. Recovery in wage growth slowed. The Wage Price Index grew 0.7% during the December quarter and was 2.3% higher than at the same time last year. Wage growth during the quarter ranged from 0.3% for education staff to 1.2% for retail workers.
  11. Domestic price pressures continued to build. Consumer prices rose 1.3% during the December quarter and were 3.5% higher than the same time last year. The largest price increases during the quarter were for new dwellings and petrol.
  12. Omicron impacts on the Australian economy will be mainly seen in 2022. There was little economic impact from the Omicron variant in the December quarter, with the additional restrictions affecting a few weeks of the last three months of 2021.

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