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The Australian economy has fully recovered from its Covid-19 recession, growing by 1.8% in the first three months of 2021 compared to the previous quarter thanks to the rise in business investment and the increase in iron ore exports.
Better-than-expected growth means the economy is now 0.8% bigger than before the coronavirus was first detected in China in December 2019, elevant Australia in a select group of nations that have grown over the last 15 months.
But economists warned that the slow pace of vaccine deployment in the country and an outbreak of Covid-19 in Melbourne, which has forced the state of Victoria to be blocked, posed a risk to recovery and dampen growth.
“Australia is a rare company here,” said Kristian Kolding, an economist at Deloitte Access Economics. “Only five more countries can boast of a larger economy now than before the pandemic. And we have achieved that goal by keeping Covid numbers lower than almost anywhere else.”
The successful removal of Covid-19 by Australian authorities and stimulus measures boosted business confidence, leading to a 5.3% increase in private investment in the March quarter.
Business investment was driven by an 11.6% increase in machinery and equipment, the strongest increase since the December quarter of 2009. Investment in housing jumped 6.4% compared to the quarter previous.
Annually, gross domestic product increased by 1.1%. The economy it grew up 3.2% in the December quarter compared to the September quarter.
Australia’s recovery has been driven by rising commodity prices, especially iron ore, on trade terms (a measure of export prices relative to import prices), which increased 7.4% in the first quarter. This brought the nation’s current account surplus to a record high of A $ 18.3 billion ($ 14.2 billion) in the March quarter.
Trade tensions with China, sparked by Canberra’s call for investigation into China’s origins Brot Covid-19 in Wuhan, have failed to dampen exports with Beijing unable to obtain alternative supplies of the steel ingredient.
According to research by Deloitte Access Economics, only Australia, China, Chile, Romania, South Korea and Lithuania have grown their economies since the Covid-19 occurred. On average, the economies of OECD countries, a group of rich nations, were 2.7% smaller than before the pandemic.
The virus, however, remains a challenge. On Wednesday, authorities extended a seven-day closure of Melbourne to contain a cluster, while only 4.4 million of the 40 m of jabs needed to cover the country’s 25 million people have been managed.
“The relative economic performance of countries will depend more than anything on the speed with which populations are vaccinated,” said Saul Eslake, a member of the University of Tasmania.
“And on this front we are far behind the United Kingdom, the United States, Canada and even most of continental Europe. Therefore, there is no guarantee that we will remain at the forefront of the group.
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