Reserve Bank of Australia governor Philip Lowe has described the rebound in economic growth that has lifted the economy of recession as “good”.
The national accounts showed the economy grew by 3.3 per cent in the September quarter, partially rebounding from the severe seven per cent contraction three months earlier.
This still left the annual growth in negative territory of minus 3.8 per cent.
Earlier, Dr Lowe had told federal MPs he had been hoping for growth of at least two per cent in the September quarter and that he expects solid growth in the December quarter as well.
“We have now turned the corner and a recovery is under way,” Dr Lowe told a House of Representatives economics committee on Wednesday.
Told during the hearing the economy had recovered 3.3 per cent in quarter, Dr Lowe said: “The positive GDP number … is good.”
The Reserve Bank had not expected the growth rate to return to its pre-COVID levels until the end of 2021.
“If we keep getting numbers like that it will be a bit quicker,” Dr Lowe said.
Household spending was the main driving force behind the rebound, rising 7.9 per cent in the September quarter after the 12 per cent drop three months earlier and adding four percentage points to growth.
Conversely, international trade detracted 1.9 percentage points from growth, the largest detraction in 40 years.
Dr Lowe had told the hearing the economy was performing much better than the central bank expected when it last addressed the committee three months ago, and when he thought it would be lucky to see positive growth in the September quarter.
“Things have turned out to be much better,” he said.
“Employment growth has been stronger, retail has been stronger and the housing market has been more resilient.”
The Reserve Bank board left its suite of monetary policy measures unchanged at Tuesday’s monthly board meeting, having cut the cash rate, and other key rates, to a record low 0.1 per cent in October.
The central bank confirmed it had bought $19 billion of government bonds under its new $100 billion quantitative easing program, which aims at keeping market interest rates low and, in turn, borrowing costs down.
The board reiterated that the cash rate is unlikely to rise for three years given the outlook for unemployment and inflation.