Australia’s strong government expenditure helps evade recession

31.08.2021 - Evdokimov Roman
Australia’s strong government expenditure helps evade recession

Government spending in Australia increased sharply in the June quarter driven by a large investment in public infrastructure. The progress provided a key boost to economic development, a potential aid in avoiding a looming recession.

Public spending climbed 2.5% to A$134.7 billion ($98.28 billion) based on the data provided by the Australian Bureau of Statistics on Tuesday. It contributed around 0.7 percentage points to gross domestic product (GDP).

Australia’s economy will definitely contract this quarter due to lockdowns’ disruption on activity. However, an increase in spending helped steer clear of recession.

Meanwhile, despite a seemingly strong consumer spending and business investment in the quarter, imports and inventories provided for the demand rather than an increased output, dragging GDP down.

Net exports were predicted to deduct a full percentage point from growth following a decline in export volume, even after an all-time-high surge in export value.

Australia’s current account deficit increased to a record A$20.5 billion in the June quarter due to rising iron ore prices and strong demand from China.

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