Overview

Q4 GDP beat expectations, rising by a strong 3.1% q/q to be down just 1.1% below pre-COVID levels. A continued rebound in household consumption drove the result, where the end of Melbourne’s strict lockdown saw Victoria record a sharp 10% rise in spending. Outside of Victoria, spending continues to recover, rising by a large 2.3% following the 11% jump in Q3 and total consumption is down just 2.7% y/y. Investment activity was also strong, up 4.1% q/q, with strength across dwellings (up 4.1%) and equipment (up 8.9%). By industry, while most industries recorded gains, agriculture, forestry and fishing was a standout, rising 27% on the back of a bumper crop. That said, tourism-related industries continue to suffer, with activity in transport, hospitality, admin and entertainment services well below levels seen a year ago. Overall, these data show the economy continuing to rebound from the pandemic, at a relatively quick pace, as well as reflecting impact of changes to consumption patterns – and the importance of the substitution between services and goods spending. The strength of private sector activity is particularly encouraging as government support began tapering in the quarter. Going forward, NAB expects GDP will reach pre-virus levels by mid 2021, but growth will ease into 2022 such that it will take at least until 2024 for spare capacity to be fully eroded. As such, unemployment will remain above full employment and inflation below target for the medium term – where this remains a headwind to the private sector recovery.

Find out more in the NAB Australian GDP Q4 2020 Report