Australian GDP slowed in the June quarter & will be hit hard by the lockdowns – but here’s 7 reasons to look beyond the gloom

September 3rd 2021

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Key Points

  • Australian GDP growth slowed in the June quarter but to a stronger than expected +0.7%qoq. This avoids a technical recession, but the current quarter is likely to see a 4% slump due to the lockdowns.
  • While there is lots of gloom around there remains a strong reason for optimism regarding economic growth in 2022: the vaccines are effective in helping prevent serious illness; Australia’s vaccination rate has increased dramatically; pent up demand will help drive recovery, and global growth is likely to be strong.



Three months ago there was much optimism about the Australian economic outlook. GDP regained its pre-pandemic level, confidence was strong, the jobs market was roaring, there was minimal community coronavirus & vaccines were providing optimism of a more sustained reopening. Since then renewed coronavirus outbreaks of the Delta variant have seen the near-term outlook turn pear-shaped – notably in NSW & Victoria. However, much as the near term is depressing in lockdown states there are good reasons for optimism about 2022.


June quarter GDP slowed less than expected

The June quarter saw GDP up 9.6% from the lockdown depressed June quarter last year, but quarterly growth slowed to 0.7%qoq. Thanks to smaller detractions from stocks & trade and very strong growth in public demand (which contributed 0.5 percentage points to growth) this was above our final estimate for a 0.3% gain and well above our initial estimate of a -0.1% decline and avoids the label of a double-dip technical recession as September quarter GDP is almost certain to be negative – providing, of course, we see some recovery into year-end.


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Source: ABS, AMP Capital


While domestic final demand rose a strong 1.7% – with consumer spending +1.1%, business investment +2.3%, dwelling investment +1.7% & public demand +1.9% – stocks detracted -0.2% points from growth and net exports -1% points.

Consistent with the growth rebound since the first half last year, the June half earnings reporting season saw listed company profits rise nearly 50% last financial year driven mainly by resources & banks, with 75% of companies seeing profits up. But the big positive was a huge return of capital to shareholders – with 89% of companies raising or maintaining dividends driving a record dividend payout of nearly $40bn and over $20bn in buybacks.


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Source: AMP Capital


First the bad news

The news flow since late June has been bleak:


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…but there is good news too

While it would be wrong to get too confident – as coronavirus has had a few occasions over the last 18 months where it looked under control only to flare up again – there is the reason for optimism and this, along with the strong return of capital to shareholders, partly explains why the Australian share market remains relatively resilient.


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Source:,, AMP Capital



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Source:, AMP Capital



The Australian economy – rough now, better in 2022

The Australian recovery will see a big setback this quarter (of around -4% for GDP), but the start of a gradual reopening from October gathering pace later this year and through next year as higher vaccination rates are reached should see the recovery start to get back on track in 2022. While growth through this year is likely to be just 1% (compared to our expectation for 4.8% 3 months ago), it’s likely to be around 6.5% through next year.


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Source: ABS, AMP Capital


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About the Author

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.