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31 Aug 2021

Australia’s Increased Government Spending May Help Avoid Recession

The Index Today

The government of Australia spent heavily on its infrastructure during the June quarter, providing a steady boost to the overall economic growth of the country. The increased spending may have played a major role in averting a recession.

According to analysts, the economy may shrink again due to lockdowns and growing covid cases in this quarter. The Australian Bureau of Statistics released data on Tuesday showing that public spending has jumped from 2.5% to A$135.7 billion during the June quarter.

Consumer spending and business investments have shown prominent growth in the last two quarters, additional demand for imports and inventories also helped boost the overall GDP.

Net exports accounted for a whole percentage point of growth as the demand for exports went down. The country’s current account deficit has also increased to A$20.5 billion. GDP numbers are expected to be notable as lockdowns are being implemented all across Sydney, Canberra, and Melbourne.

According to chief Australia economist of BIS Oxford Economics, “around 60% of the population are currently in lookdown and the economy is likely to contract by well over 3% this quarter.”

But on the other hand, high vaccination rates may help the economy recover quickly as restrictions may begin to ease by the end of the year. Prime Minister Scott Morrison plans to reduce restrictions once 70% of the population has been vaccinated.

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