Next week’s national accounts will likely reveal the second biggest economic fall on record, but the latest jobs, retail and business investment figures show a booming “W-shaped” recovery is well underway.
The economy is expected to have contracted between 2.5 per cent and 4 per cent in the three months to September 30. That would mean $20 billion was wiped off GDP due to delta lockdowns.
But Treasurer Josh Frydenberg said business investment was “set to take off” this year, with $100 billion in non-mining investment planned. “It would represent the highest level of non-mining capex on record,” he said.
Retail sales figures released by the Bureau of Statistics on Friday showed trade surged 4.9 per cent in October following the worst result on record in the three months prior. The push higher was across all categories.
Payroll jobs figures from the ABS this week showed employment is on track to regain the 330,000 jobs lost on lockdown by the beginning of December.
“We expect quarter four growth of around 3 per cent, almost enough to bring GDP almost back to its quarter two 2021 level and creating a unique ‘W-shaped’ recovery,” NAB chief economist Alan Oster said.
But supply chain constraints and skills shortages threaten to constrain Australia’s growth potential, while a global wave of inflation has markets disbelieving of the Reserve Bank’s guidance for record low rates to 2024.
Scepticism of the RBA’s outlook is pushing bank borrowing costs higher, which is flowing through to loan products. The Commonwealth Bank increased its fixed rate mortgage for the third time in six weeks.
Ursula and Hans Van Schoonhoven, founders of Victoria-based Dutch homewares retailer House of Orange, had to adapt quickly during the pandemic after watching their sales fall 99.5 per cent within weeks.
Originally a wholesaler for more than 300 retailers across the country, the duo pivoted to being wholly consumer-facing in the first national lockdown.
“That was quite a big challenge, but we haven’t looked back,” Mr Van Schoonhoven told AFR Weekend, adding the pivot had allowed fewer product sales with higher margins.
This had the benefit of reducing shipping costs out of Europe, which lifted from about $US2000 for a container to $US12,000. The House of Orange was bringing in 70 to 80 containers a year pre-COVID-19.
The surge in people feathering their nests during lockdown turned out be a boon for the business, while the decision to shift to online consumer sales captured a significant shift in consumer spending patterns.
“There was a very high level of confidence shopping online,” Ms Van Schoonhoven said.
Online sales nationally hit a record high during the delta lockdowns, according to the ABS; while spending on household goods remains about $1 billion higher each month than before the pandemic.
Apparel sales, department stores and hospitality had the biggest bounces in October after taking the biggest hits on lockdown. Apparel sales were up 27.7 per cent, department stores 22.4 per cent and hospitality 12.3 per cent.
Trade in NSW lifted 13.3 per cent, while the ACT lifted 20 per cent. Victoria, which only exited lockdown late in the month, lifted 3 per cent. Those positive results will be further strengthened in November with $5.4 billion in Black Friday and Cyber Monday sales expected over the weekend.
The Xero Small Business Index – a monthly gauge for how small business is travelling in the pandemic – lifted 5 points in October, but is still below par. This reflects the slower pace of recovery for SMEs throughout the pandemic.