Housing market drives GDP growth to pre-COVID levels

by Mike Wood02 Jun 2021

Australia’s GDP is back to the levels of March 2020, according to new numbers released by the Australian Bureau of Statistics (ABS).

Their study on the March quarter of 2021 saw GDP rise 1.8% in seasonally adjusted chain volume terms, taking it back to equivalent levels from March 2020, before the lockdowns kicked in across Australia.

"With 1.8% growth in the March quarter 2021, Australian economic activity has recovered to be above pre-pandemic levels and has grown 1.1% through the year." said Michael Smedes, Head of National Accounts at the ABS. 

The ABS picked out the housing market as a key driver of economic growth, with dwelling investment up 6.4% on the back of new housing approvals and the HomeBuilder scheme. Construction also jumped 4.4% and was the strongest industry in Australia.

“Broadly speaking, the GDP came in once again above what was expected by many,” said Dr Andrew Wilson, Chief Economist at Archistar. “I guess we’re getting used to underestimating the regeneration of our economy post-COVID.”

“So many measures have been significantly better than were predicted, and this is no exception. GDP is now tracking on an annualised basis at a higher level, and we shouldn’t be surprised: there’s an adjustment process happening from the COVID issues that impacted our economy last year.”

“Really, our decline in growth was a June quarter experience last year, so even though we had consecutive declines in GDP from March and June, it was all about June because March was down just 0.3%. It was really a fake recession in that sense, and we’ve quickly recovered what we lost.”

“Even though the trend has declined since then, it’s very much positive and we’re back positive again. We’re getting back to a more normalised environment, but we’ve got some way to go.

“Looking at the details of GDP growth and how it might impact the housing market, two of the big contributors were consumer spending and dwelling construction. Obviously, consumer spending is part of the recovery and we’ve seen retail sales very strong and we’re on the cusp of a building boom as a result of the HomeBuilder policy.

“Again, it reinforces that any negative sentiment regarding Australia’s economic outlook from the point of view of consumers is not being supported in the data, which continues to surprise on the upside.”