Economists at National Australia Bank say the post lockdown spending sugar hit is expected to continue until Christmas; however, hospitality and tourism will wane while restrictions persist.
Latest consumption figures from the country’s largest business bank has revealed spending rose 5.4 per cent year-on-year for the week ending November 7, largely off the back of easing restrictions in Victoria that have rejuvenated the country’s second largest regional economy.
Overall, weekly spending in Victoria jumped 7 per cent and reflected the first week of hospitality and retail traders being able to resume operations.
Hospitality consumption still remains at lower levels compared with the same period in 2019 due to ongoing restrictions limiting the number of patrons at venues.
NAB chief economist Alan Oster said he initially expected gross domestic product (GDP) for the December quarter to be flat as a result of the tapering of stimulus packages but flagged the recent uptick in consumption could be a sign of a more resilient economy.
“We are dealing with the worst recession since the Great Depression … but the medium-term outlook for Australia is pretty good,” Mr Oster said.
“Hospitality is starting to move up … but is still a bit lousy.”
Accommodation and food consumption for the week ending November 7 was down 2.9 per cent on the same period in 2019, while retail trade consumption was up 12.5 per cent.
NAB head of small business, Ana Marinkovic said the reduction in the number of business loans on deferral due to the pandemic was a positive sign; however, the road to a full recovery would not happen overnight.
“We need to prioritise the recovery of small business as they are key to our ongoing prosperity,” she said.
“For most of that diversified small business sector I am seeing very strong green shoots and the ability to recover. In some cases also we have seen some businesses grow.”
Ms Marinkovic noted travel, events and hospitality sectors continued to be the most impacted from the health crisis and would likely need ongoing support while restrictions persisted for the foreseeable future.
Mr Oster said the reopening of state borders before the holiday season was imperative to inject much-needed stimulus into areas of Australia that are reliant on tourism.
“If we don’t open the (state) borders that can cause a lot of grief,” Mr Oster said.
“If you were going to get everybody who was going to go to Europe to go locally, you would add about 1 per cent to GDP.”
More Australians travel overseas compared with international tourists visiting Australia.
Originally published as Spending surge to last until Christmas