International economic comparisons after a year of the pandemic

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Released
2/06/2021
Source
Australian National Accounts: National Income, Expenditure and Product, March 2021
Released
02/06/2021 11:30am AEST

The March quarter 2021 national accounts provide insights into the state of the economy a year on from the start of the COVID-19 pandemic. The economic impact of the pandemic was first seen in official national accounts estimates in Australia and across much of the world during the March quarter 2020.

Figure 1 shows GDP growth for the March quarter 2021 and change since December quarter 2019 pre-pandemic levels. Australia’s economy experienced a faster recovery than most OECD countries, with levels of activity now exceeding those prior to the pandemic.

a. International GDP data obtained from https://stats.oecd.org/ on 28 May 2021.

Mobility and the economy

Insights on mobility can be gained from Google’s COVID-19 Community Mobility Reports. This dataset shows how visits to various locations have changed compared to a baseline period prior to the pandemic. Mobility captures the stringency of COVID-19 restrictions and the population’s confidence to move and interact in the economy with safety.

There is a strong correlation between economic growth measured by GDP and change in visits to retail and recreational locations measured by Google mobility data. Countries which have experienced lower levels of mobility have generally reported weaker GDP results. Figure 2 shows GDP growth from December quarter 2019 to March quarter 2021, against average change in mobility over the same period.

Australia’s GDP is 0.8% higher than December 2019, which is among the strongest results across OECD countries and one of the few countries to be above pre-pandemic levels. This aligns with Australia’s above average mobility through the pandemic, reflecting faster easing of COVID-19 restrictions relative to most OECD countries.

a. International GDP data obtained from https://stats.oecd.org/ on 28 May 2021.

b. Mobility data obtained from https://www.google.com/covid19/mobility/ on 14 May 2021.

Mobility and household spending

Restricted mobility through the pandemic reduced consumer demand and limited the ability of businesses to supply goods and services to households. Household spending accounts for over half the economy and drove GDP contractions during the pandemic. This relationship is further explored by comparing mobility to retail and recreational locations with growth in household spending since the beginning of the pandemic (figure 3).

Containment measures were strongest in the June quarter 2020, resulting in a 22.4% fall in average visits to retail and recreational locations compared to the previous quarter. Consumers adhered to the restrictions and household spending declined by a record 12.3% for the quarter, which drove a 7.0% fall in GDP. The decline in GDP in June quarter 2020, the height of the pandemic, was of similar magnitude to many other OECD countries.

Mobility increased strongly in subsequent quarters as low case numbers in most states and territories allowed COVID-19 restrictions to ease at a faster rate than most OECD countries. This resulted in increased household spending and a quicker economic recovery in Australia.

a. Mobility data obtained from https://www.google.com/covid19/mobility/ on 14 May 2021.

a. International HFCE data obtained from https://stats.oecd.org/ on 28 May 2021.

Changes in household spending on goods and services

After significant falls resulting from COVID-19 containment policies in the March 2020 and June 2020 quarters, spending on services has led the recovery. However, spending on services remains below pre-pandemic levels. Expenditure on goods was less affected by restrictions and continued to exceed pre-pandemic levels (figure 5).