Q4 GDP Adds To Strong Run Of Data, But COVID Limits Animal Spirits

The stronger than expected run of domestic data continues as Q4 GDP tops broader expectations, with a particularly notable improvement in terms of trade witnessed. The ABS noted that "this is the first time in the over sixty year history of the National Accounts that GDP has grown by more than 3.0% in two consecutive quarters." Although the COVID backdrop of course provided a low short-term base to work from, with the Y/Y reading -1.1%. Despite an uptick in household and private consumption, a sense of broader consumer caution remains, with the ABS noting that "household spending in Victoria was 7.2% below its pre-COVID level. Household spending for the rest of Australia, excluding Victoria, was 1.1% lower than pre-COVID levels." This sense of continued caution was also evident on the savings front, with the savings ratio remaining elevated in historical terms but moderating further from its the Q2 peak. The ABS noted that "compensation of employees rose 1.5% as employment and hours worked increased with underlying activity in the economy. Despite this, household income fell as non-labour income declined with a reduction in government support payments. The household saving to income ratio remained elevated at 12.0%."