Droughts, fires, cyclones, hailstorms and a pandemic – the March quarter 2020

The Australian Statistician's Analytical Series provides insights into topical economic and/or social developments captured in ABS data

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Released
15/06/2020

Author area: Macroeconomic Statistics Division¹

1.1 Measuring the economy through extreme events

The March quarter of 2020 will be remembered for a succession of extreme events in Australia. Drought, severe bushfires, cyclones, hail storms and the outbreak of a global pandemic dominated the first quarter of the new decade.

Cumulatively, the extraordinary conditions that shaped the March quarter disrupted almost every aspect of Australian society and the economy. Measuring the impact of these events was critically important to give the Australian people, businesses and government an accurate evidence base to make informed decisions.

As Australia’s national statistical organisation, the ABS plays a leading role in measuring an economy under unprecedented pressure.

A dual approach was taken. To complement its regular economic publications, the ABS introduced a series of near real-time, quick turnaround surveys to provide more up-to-date information in the fast-changing economic and social environment.

While these 'rapid response' surveys helped meet the immediate demand for timely information, the range of regular ABS statistical publications continued to provide the benchmarks for measurement of the Australian economy.

This article brings together data from key ABS economic statistical releases such as the National and International Accounts, the Labour Force Survey, price indexes and government finance statistics to create a comprehensive record of how the Australian economy weathered the events of the March quarter. This crucial baseline data will provide the foundation for future comparisons and analysis, as the impacts of COVID-19 continue to unfold in subsequent quarters.

1.2 Overview of March quarter 2020 events and economic impacts

As 2019 drew to a close, the Australian economy continued its record stretch of continuous growth with high labour force participation and low unemployment. However, weaker revenue forecasts led the government to reduce the predicted 2019/20 surplus from $7.1 billion to $5 billion in the December Mid-Year Economic and Fiscal Outlook (MYEFO). Announcing this reduction, the Treasurer noted that the "...devastating drought has already taken a quarter of a percentage point off GDP growth and reduced farm output by a significant amount over the last two years."

The drought certainly took a significant toll in the lead-up to 2020. Drier than normal conditions affected large areas of New South Wales and Queensland from 2017. By August 2018, all of NSW and large parts of Queensland were drought declared. By the year’s end, the Bureau of Meteorology declared 2019 Australia's warmest and driest year on record.

While the initial effects of the bushfires were noted by the time of MYEFO, worse was yet to come. At the close of 2019, the dry conditions of previous years, coupled with build-ups of fuel and summer weather systems saw fire danger rated as catastrophic in many areas for the first time since such ratings began. By early January 2020, fires were burning across the country. In New South Wales, 2019/20 was the most devastating bushfire season in the state’s history. By 31 March, the end of the NSW bushfire season, more than 5.5 million hectares had been burned, more than 2,000 houses destroyed and 25 lives lost in NSW alone.

Smoke from the bushfires blanketed Australia’s south-east for many months with substantial adverse ecological, economic and social effects, including on public health.

On 19 January, in Victoria relief from fire conditions took the form of an intense hail-storm in Melbourne, which brought destructive winds and heavy rain to a wider area. That evening, a major dust storm enveloped western NSW, leaving towns temporarily in a new dust-filled darkness yet bringing little rain to areas around Nyngan, Parkes and Dubbo.

Severe thunderstorms and hail hit the eastern states again on 20 January pounding Sydney and Canberra, with storm damage and loss of power spreading as far north as South-East Queensland.

On the afternoon of 8 February, Tropical Cyclone Damien made landfall on the coast near Karratha, WA. Sustained gales and heavy rain accompanied the cyclone, causing extensive damage in the Pilbara region. Cyclone Esther followed but was less intense, dissipating into a low-pressure system which meandered across the NT and Kimberley region, bringing much needed rain to many areas.

In late January Australia started to record a small but steady stream of COVID-19 cases. New cases climbed from 2 March before peaking on 28 March.

Travel bans, which came into force progressively from 1 February, and social distancing restrictions, which were implemented in two phases on 23 and 26 March, saw the number of new cases begin to fall as the quarter ended.

As the impacts of COVID-19 were felt across the globe, the Government announced stimulus packages including the JobKeeper package, on 30 March.

Figure 1: A timeline of events in the March quarter, 2020

A timeline of events in the March quarter, 2020

Sources: https://www.covid19data.com.au/states-and-territories
https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov-health-alert/coronavirus-covid-19-current-situation-and-case-numbers
https://earthdata.nasa.gov/faq/firms-faq#ed-viirs-375m-product


The challenging conditions of the March quarter caused households, businesses and the government to respond in a variety of ways. These responses were seen in the economic statistics produced by the ABS. This article brings together the key economic statistics stories of the March quarter 2020 and the ABS will publish a similar overview after the release of the June quarter 2020 national accounts.

Overall, Australian Gross Domestic Product (GDP) fell 0.3% in seasonally adjusted, chain volume terms in the March quarter 2020 and growth slowed to 1.4% through the year. This was the slowest through-the-year growth since September 2009 when Australia was in the midst of the Global Financial Crisis. However, this figure captured only the start of the expected economic effects of COVID-19, which will continue to be captured throughout the June quarter.

Figure 2: GDP growth rates, chain volume measures: seasonally adjusted

Figure 2: GDP growth rates, chain volume measures: seasonally adjusted

Combination chart with 2 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from -0.3 to 4.7.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020


The key contributions to GDP growth were from net exports and general government consumption. This article looks at these (see Section 4.1 and 5.1) plus household consumption (Section 2.4).

Figure 3: Contribution to GDP growth, seasonally adjusted

Figure 3: Contribution to GDP growth, seasonally adjusted

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The chart has 1 Y axis displaying values. Data ranges from -0.6 to 0.5.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020

Households

2.1 Jobs and hours worked fell

For most of the March 2020 quarter, there was no noticeable impact on the labour force from the bushfires or COVID-19. Labour Force Survey data showed the seasonally adjusted unemployment rate remained between 5.1 and 5.3% from January through to March.

However, late in the March quarter, with the shutdown of non-essential services and new trading restrictions due to COVID-19, the jobs and labour market landscape changed dramatically. This was strikingly apparent in the first release of Weekly Payroll Jobs and Wages in Australia based on Single Touch Payroll data from the Australian Taxation Office.

Weekly Payroll Jobs and Wages in Australia (19 May release, which incorporates revisions from earlier releases) showed that between 14 March and 4 April (the three weeks after Australia recorded its 100th confirmed COVID-19 case) payroll jobs decreased by 6.3%. with the largest impact of net job losses, in percentage terms, affecting people under 20 (15.7%).

Travel bans and social distancing restrictions inflicted the heaviest losses on Accommodation and food services, with the industry shedding 27.2% of its payroll jobs. Jobs in the Arts and recreation services industry fell by 20.6%, while across all industries, total wages paid by businesses decreased by 5.3% over the period.

Figure 4: Changes in payroll jobs between 14 March and 4 April, by Industry

Figure 4: Changes in payroll jobs between 14 March and 4 April, by Industry

Bar chart with 19 bars.
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The chart has 1 Y axis displaying %. Data ranges from -27.2 to -1.6.
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Source: 6160.0.55.001 - Weekly Payroll Jobs and Wages in Australia, Week ending 2 May 2020


Other ABS statistics subsequently provided more detail and context. Seasonally adjusted employment estimates from the Labour Force Survey fell by 594,300 people between March and April. However, this large drop in employment didn’t translate into a similar-sized rise in the number of unemployed people because around 489,800 people left the labour force.

While the unemployment rate increased by 1.0 percentage point to 6.2%, the larger than usual number of employed and unemployed people leaving the labour force resulted in an unprecedented 2.4 percentage point fall in the participation rate to 63.5%. When taken together with people leaving the workforce, around 2.7 million people (about 1 in 5 people employed in March) either left employment or had their hours reduced between March and April.

As a result, the number of underemployed people also rose sharply (up 603,300 people, to a total of 1.8 million people), and the underemployment rate rose to a record high of 13.7% (up 4.9 percentage points).

The underutilisation rate, which combines the unemployment and underemployment rates, also rose to a record high of 19.9%.

The impact of the COVID-19 pandemic on hours worked, a key measure of labour input into the economy, was also extensive. The Labour Account estimate of hours worked fell 0.8% in the March quarter, with significant impacts on key national accounts aggregates including GDP per hour worked and unit labour costs.

Figure 5: GDP per hour worked, seasonally adjusted

Figure 5: GDP per hour worked, seasonally adjusted

Combination chart with 2 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from -1.3 to 4.1.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Hours worked in the national accounts
 

2.2 Household non-life insurance claims rose

In the March quarter, over 2,000 dwellings were destroyed in the bushfires and properties and cars were damaged in the 19 and 20 January hailstorms. These resulted in household non-life insurance claims increasing by $1.4 billion compared to the previous quarter, and took the value of household claims to a record high of $13.8 billion. The economic activity associated with rebuilding destroyed or damaged dwellings, commercial buildings and infrastructure will be reflected in upcoming quarters.

Figure 6: Total value of household non-life insurance claims, current prices: seasonally adjusted

Figure 6: Total value of household non-life insurance claims, current prices: seasonally adjusted

Bar chart with 121 bars.
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The chart has 1 Y axis displaying $b. Data ranges from 1.723 to 13.751.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Bushfires in the national accounts
 

2.3 Household income rose from increased social benefits

Household gross disposable income rose 1.4% in the March quarter 2020. Compensation of employees was subdued with reduced hours and job losses. Increases in social benefit recipients and the value of benefits drove the quarterly increase, contributing 0.6 percentage points to growth. This was the largest contribution from social assistance benefits since the Household Assistance Package in June 2012. The first $750 economic support payment and Australian government disaster support payments contributed to the increase.

Figure 7: Household gross disposable income, contribution to quarterly growth, current prices: seasonally adjusted

Figure 7: Household gross disposable income, contribution to quarterly growth, current prices: seasonally adjusted

Combination chart with 3 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying ppt. Data ranges from -1.611676996 to 2.769739164.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Insights into household income

Figure 8: Social assistance benefits payments and recipients

Figure 8: Social assistance benefits payments and recipients

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The chart has 2 Y axes displaying no. and $m.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Insights into household income, based on ABS and Department of Social Services Data, see also https://data.gov.au/dataset/ds-dga-728daa75-06e8-442d-931c-93ecc6a57880/distribution/dist-dga-1120abb8-997b-4d3a-b262-4c84f9c92985/details?q=jobseeker
 

2.4 Household consumption fell with a decrease in demand for services

Notwithstanding the modest growth in household income, household consumption decreased by 1.1% in the March quarter and by 0.2% for the year. These were the first falls in household final consumption expenditure since the global financial crisis.

Figure 9: Household consumption, volume measures, seasonally adjusted

Figure 9: Household consumption, volume measures, seasonally adjusted

Combination chart with 2 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from -1.1 to 4.4.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020


The decrease in the March quarter 2020 was driven by a 2.4% fall in services consumption, partly offset by an increase in goods consumption of 1.0 percent.

Figure 10: Goods and services consumption, volume measures, seasonally adjusted

Figure 10: Goods and services consumption, volume measures, seasonally adjusted

Line chart with 2 lines.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from -2.4 to 2.2.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020


The fall in services consumption was particularly acute for some services:

  • Travel disruptions, reduced foot traffic and bushfires drove a large fall in hotels, cafes and restaurants, with falls across both catering services and accommodation services categories.
  • Reduced demand for travel and stay-at-home measures led to a decrease in transport services, particularly air passenger services.
  • Social distancing measures and the deferral of elective medical procedures resulted in a reduced supply and demand for health services.
  • Restrictions on indoor and outdoor gatherings had a major impact on recreational and cultural services, particularly on gambling activity, sporting services and cinema admissions.
     

Figure 11: Individual services consumption through the year, volume measures, original

Figure 11: Individual services consumption through the year, volume measures, original

Bar chart with 4 data series.
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The chart has 1 Y axis displaying %. Data ranges from -14.54827854 to 3.914988814.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Household consumption behaviour in response to COVID-19
 

2.5 Household saving to income ratio rose

The household saving to income ratio rose to 5.5%, up from 3.5% in the December quarter, reflecting both the rise in gross disposable income and falls in consumption. This was the highest household saving to income ratio since September 2016.

Figure 12: Household saving to income ratio, seasonally adjusted

Figure 12: Household saving to income ratio, seasonally adjusted

Line chart with 33 data points.
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The chart has 1 Y axis displaying %. Data ranges from 2.6 to 9.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020
 

2.6 Food prices rose due to drought, bushfires, COVID-19 and international demand

Early in 2020, the drought had severe adverse impacts on Australia’s agricultural growing regions, placing significant pressure on producers seeking to meet domestic and international demands. This impacted the prices paid by consumers and businesses for agricultural products such as fruit and vegetables, meat, milk and dairy products.

As the bushfires intensified in January, tourism-related activity such as domestic travel, accommodation and food services declined in the affected areas. The fall in the number of people visiting regional areas, and supply chain disruptions due to the bushfires, were evident in the scanner data for food sold in regional areas.

Food sales were higher in the capital cities than in regional areas across all of the states and territories that have significant regional populations, particularly New South Wales and Victoria.

Figure 13: Scanner data food volumes, quarterly growth, original

Figure 13: Scanner data food volumes, quarterly growth, original

Bar chart with 2 data series.
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The chart has 1 Y axis displaying %. Data ranges from -7.5 to 3.7.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Bushfires in the national accounts


Other events in the March quarter compounded difficulties for farmers and price effects flowed through to households. Table 1 shows where March quarter 2020 events raised food category prices.

Table 1: Notable March quarter events impacting food category prices

Sub-GroupDroughtBushfireInternational demandCOVID-19
Bread and cereal productsX  X
Meat and seafoodsXXXX
Dairy and related productsX  X
Fruit and vegetablesXX X
Food products n.e.c.XX X
Non-alcoholic beverages   X
Meals out & takeawayXX  

Source: 6401.0 - Consumer Price Index, Australia, March 2020
 


More detailed information on the actual price movements in these food categories is available from the Consumer Price Index (CPI), which measures the prices paid by Australian households for a basket of goods and services. The most significant price rises in the March 2020 quarter were for food and non-alcoholic beverages (+1.9%), alcohol and tobacco (+1.6%), education (+2.6%) and health (+1.7%).

The most significant price falls for the quarter were for automotive fuel (-6.0%), domestic holiday travel and accommodation (-3.1%) and international holiday travel and accommodation (-3.0%).

As shown in Table 1, meat and seafood products was one food category affected by a range of events. In addition to the drought, international demand for Australian meat products increased over 2019 and into 2020, as shown in Figure 14. The increased demand was driven by African Swine Fever (ASF) decreasing the supply of pork products worldwide. Chinese consumers substituted from pork products to alternative proteins, increasing demand for Australian meat products.

Figure 14: Australian meat exports to China

Figure 14: Australian meat exports to China

Line chart with 3 lines.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying Tonnes. Data ranges from 956.1 to 34291.4.
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Source: Department of Agriculture, Water and the Environment, see http://www.agriculture.gov.au/export/controlled-goods/meat/statistics


As a result of the increased demand, domestic meat prices rose, and the food category ‘meat and seafood products’, which has a weight of 2.23% in the Australian CPI, rose 5.6% over the year to March quarter 2020.

Figure 15: Meat and seafood price index

Figure 15: Meat and seafood price index

Line chart with 21 data points.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying Index. Data ranges from 105.8 to 121.8.
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Source: 6401.0 Consumer Price Index, Australia, March 2020


Most COVID-19 related restrictions and economic stimuli came into effect in mid to late March, and therefore didn’t have a significant impact overall on the CPI for the March 2020 quarter. However, in response to growing concerns about the global pandemic, Australian households did increase purchases of certain goods and services, which raised their prices.

The Furniture and furnishings group in the CPI rose (+0.8%), which is unusual for the March quarter. The increase was driven by other non-durable household products (which includes toilet paper), household textiles and personal care (including hand sanitisers).

Less discounting, decreased consumer price sensitivity and significant supply chain issues as consumers stocked-up led to a noticeable price effect in the last two weeks of the March 2020 quarter for a range of food products (Table 2).

Table 2: Impact on food prices, % increase

 Dec quarter 2019 to mid-March 2020Dec quarter 2019 to end-March 2020Change
 (Includes drought and bushfire effects)(Includes drought, bushfire and COVID-19 purchasing effects)(% pts)
Food and non-alcoholic beverages group1.51.90.4
Bread and cereal products0.51.20.7
Meat and seafoods1.42.00.6
Dairy and related products0.81.10.3
Fruit and vegetables4.96.01.1
Food products n.e.c.1.62.30.7
Non-alcoholic beverages1.22.00.8

Source: Analysis of detailed (previously unpublished) ABS prices data
 

Automotive fuel had the most significant price fall for the quarter as COVID-19 travel restrictions reduced demand and global crude oil prices fell. The Petroleum, petroleum products and related materials import price fell 11.1% in the March quarter. In Australia, the price of automotive fuel fell in January (-0.8%), February (-3.4%) and March (-9.3%). Figure 16 shows the average daily prices for unleaded petrol for the eight capital cities over the past fifteen months.

Figure 16: Average price of unleaded petrol (91 Octane), cents per litre

Figure 16: Average price of unleaded petrol (91 Octane), cents per litre

Line chart with 2 lines.
The chart has 1 X axis displaying Quarter.
The chart has 1 Y axis displaying cents. Data ranges from 115.9374305 to 162.0743667.
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Source: 6401.0 - Consumer Price Index, Australia, March 2020


In addition to stockpiling of some food items, household expenditure on a range of other goods rose as people prepared for the possibility of an extended period at home:

  • Purchases of furnishings and household equipment increased, particularly tools and appliances as well as cleaning products.
  • Household purchases of recreational and cultural goods increased with increased expenditure on audio-visual equipment, laptops and computers, as well as sporting equipment.
  • Households also stocked up on pharmaceutical supplies, with increased spending on medicines, medical aids and therapeutic appliances.
     

Figure 17: Individual goods consumption through the year, volume measures: original

Figure 17: Individual goods consumption through the year, volume measures: original

Bar chart with 4 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from 0.259201659 to 9.14881297.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – Household consumption behaviour in response to COVID-19
 

2.7 Household spending on healthcare fell as a result of social distancing

Compared to the previous quarter, spending on medicines, medical aids and therapeutic appliances increased by 5.4% but total health spending by households fell 1.6% in the March quarter, with health services falling 5.3%.

Social distancing measures led to a reduction in demand for health services that involved face to face interactions, including general practice and allied services such as physiotherapy, dental and optical.

Figure 18: Household final consumption expenditure on health, quarterly change, volume measures: seasonally adjusted

Figure 18: Household final consumption expenditure on health, quarterly change, volume measures: seasonally adjusted

Combination chart with 3 data series.
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The chart has 2 Y axes displaying % and values.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – COVID-19 impacts on health activity
 

2.8 Personal finance commitments declined

Loan commitments to households for personal finance declined significantly at the end of the quarter. There were particularly steep falls in new loan commitments for the purchase of road vehicles (down 10.2%) and for travel and holidays (down 42.8%).

Figure 19: Value of personal fixed term loans by purpose, seasonally adjusted

Figure 19: Value of personal fixed term loans by purpose, seasonally adjusted

Line chart with 8 lines.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying $b. Data ranges from 0.0203 to 2.3408.
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Source: 5601.0 - Lending Indicators, Mar 2020


The value of new loan commitments for housing slowed slightly over the March quarter 2020 following a period of considerable strength in the second half of 2019. This slowdown started before most COVID-19 restrictions were in place. The slowdown in the March quarter was largely driven by weaker demand from investors for new loan commitments for housing from January to March 2020. Subdued growth in rents and ongoing tighter lending criteria, particularly for interest-only loans, appeared to have been moderating growth in investor lending.

Businesses

3.1 Agriculture - livestock and meat affected by drought

Worsening drought and lack of feed in the eastern states during 2019 forced many sheep and cattle producers to destock. Data from the 2018-19 Rural Environment and Agricultural Commodities Survey showed that by 2018-19, Australia’s sheep flock had already fallen to its lowest level in 113 years, with a fall of 7% in 2018-19 to 66 million sheep. Following a similar pattern, the beef cattle herd reduced 6% to 22 million head in 2018-19.

As farmers sought to destock, the slaughtering of cattle and sheep continued to rise throughout 2019 and into the start of 2020. However, as drought conditions eased through February and March, farmers began rebuilding their herd and flock sizes, resulting in a decreased supply to abattoirs.

Figure 20: Sheep slaughtered and mutton produced - seasonally adjusted

Figure 20: Sheep slaughtered and mutton produced - seasonally adjusted

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Source: 7218.0.55.001 - Livestock and Meat, Australia, Mar 2020
 

3.2 Retail fell, surged as consumers stockpiled and restaurants closed and then plummeted in April

In January, the bushfires and related smoke negatively impacted a range of retailers, with reduced foot traffic, disrupted trading hours and reduced tourism.

There were seasonally adjusted falls in household goods retailing (-1.3%), department stores (-2.8%), clothing, footwear and personal accessory retailing (-1.6%), other retailing (-0.4%), and cafes, restaurants and takeaway food services (-0.1%). These falls were partially offset by a rise in food retailing (0.4%).

Overall, in January 2020, Australian retail turnover fell 0.4%, current price, seasonally adjusted, but rose by 0.6% in February 2020, as retailers began to experience a range of impacts from COVID-19.

February 2020 saw rises for food retailing (1.0%), department stores (3.8%), household goods retailing (0.9%), cafes, restaurants and takeaway food services (0.3%), and other retailing (0.2%). These rises were partially offset by a fall in clothing, footwear and personal accessory retailing (-3.0%).

With the rising impacts of COVID-19, Australian retail turnover surged in March 2020, by 8.5%, seasonally adjusted. There was unprecedented demand in food retailing, household goods, and other retailing. Analysis of supermarket and grocery store scanner data backed up stories of consumers stockpiling for the pandemic and television images of empty supermarket aisles. Monthly turnover for products such as toilet and tissue paper, flour, rice and pasta doubled.

As consumers prepared for working from home during the pandemic, retail turnover for home office equipment also increased. In contrast the social distancing measures led to falls in cafes, restaurants and takeaway food services.

Spending in clothing footwear and personal accessory retailing, and department stores, was also weak. The March month saw both the strongest rise in food retailing (24.1%), and the largest fall in cafes, restaurants and takeaway food services (-22.9%), since the retail series began around forty years ago. Other notable rises were in other retailing (16.6%), and household goods retailing (9.1%). Other notable falls occurred in clothing, footwear and personal accessory retailing (-22.6%), and department stores (-8.9%).

The rises experienced in March were short-lived with retail turnover in April plummeting by 17.7% month-on-month, seasonally adjusted. All retail sectors saw falls in April, the largest being clothing, footwear and personal accessory retailing (-53.6%).

Analysis of supermarket and grocery store scanner data showed that product categories with substantial rises in March had the largest monthly falls in April. Falls were led by canned meat and seafood (-56%), pasta and rice (-52.4%), and canned and dry soup mix (-48.4%). Toilet paper and other paper products were down 43.5%.

In April 2020 online retail sales comprised 11.1% of total retail sales compared to 7.1% in March. Rises were seen in the online sales of pure-play and multichannel retailers.

Figure 21: Retail turnover, Australia

Figure 21: Retail turnover, Australia

Line chart with 2 lines.
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The chart has 1 Y axis displaying $m. Data ranges from 24727.6 to 30110.9.
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Source: 8501.0 - Retail Trade, Australia, Apr 2020
 

3.3 Overseas arrivals and departures fell

Some of the earliest COVID-19 changes to business conditions in the March quarter were caused by the travel restrictions progressively put in place by the Australian Government from the beginning of February. Australia recorded its largest ever drop in visitor arrivals (-60%) over the year to March 2020. There was also a record fall in the number of Australian residents returning from short-term trips overseas, down 29% to 538,400.

The steep fall in visitor arrivals to Australia in March was from all regions of the world. Even the largest source country New Zealand, recorded a 56% drop. Of the top 10 source countries, China recorded the largest decrease of 78% followed closely by Japan with a decrease of 75%.

Of all arrivals to Australia travelling on an international student visa, there was a fall of 62,590 students (-34%) over the year to February 2020, and a fall of 11,790 students (-16%) over the year to March 2020.

Figure 22: Visitor arrivals by month - short-term trips(a)

Figure 22: Visitor arrivals by month - short-term trips(a)

Line chart with 121 data points.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying Thousands. Data ranges from 331.89 to 1077.723.
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  1. Short-term trip is less than 1 year.

Source: 3401.0 - Overseas Arrivals and Departures, Australia, Mar 2020
 

3.4 Gross value added fell in a number of industries

While retail sales grew over the quarter, the fall in overseas visitors, coupled with social distancing restrictions made conditions difficult in a range of industries. Gross value added fell 0.3% in the quarter but increased 1.3% through the year. The largest falls were seen in Accommodation and Food Services, Transport, Postal and Warehousing, Other services, Administrative and support services and Arts and Recreation Services. In contrast, Manufacturing, Wholesale Trade and Retail Trade recorded rises with increased demand for food, chemical products and home office equipment.

Figure 23: Gross value added, selected industries, volume measures: seasonally adjusted

Figure 23: Gross value added, selected industries, volume measures: seasonally adjusted

Bar chart with 3 data series.
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The chart has 1 Y axis displaying %. Data ranges from -7.5 to 2.6.
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Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020

International trade and investment

4.1 Current account records a fourth successive quarterly surplus

The March quarter 2020 saw the 19th consecutive surplus in the balance of goods and services ($10.9 billion). This contributed 0.5 percentage points to growth in GDP.

Figure 24: Goods and services (chain volume measures), seasonally adjusted ($b)

Figure 24: Goods and services (chain volume measures), seasonally adjusted ($b)

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Source: 5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2020


February saw Tropical Cyclone Damien disrupt transport and other activities resulting in a fall in iron ore exports. Supply chain disruptions from China reduced imports of a broad range of consumption and intermediate goods, although these disruptions eased somewhat in March. Particularly noticeable in the quarter were falls in the imports of textiles clothing and footwear (down 7% in current price and volumes) and household electrical items (down 7% in current price and 8% in volumes).

COVID-19 travel restrictions had the largest adverse impact on both exports and imports of services. Exports of travel services fell $3.2 billion, as fewer overseas visitors came to Australia, and imports of travel services fell $2.7 billion as fewer Australian residents travelled overseas. Travel services exports were spared further weakness as a substantial number of international students arrived prior to border closures.

Figure 25: Volume of travel services, seasonally adjusted ($b)

Figure 25: Volume of travel services, seasonally adjusted ($b)

Bar chart with 2 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying $b. Data ranges from 9.11 to 16.27.
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Source: 5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2020


Primary income credits rose (1%) and debits fell (2%) in current price, seasonally adjusted terms. The main component of the debit fall was from compensation of employees, down $515m (22%) as COVID-19 restrictions impacted Australian resident businesses employing non-residents.

Australia's net International Investment position fell ($101.4 billion) during the March quarter 2020. COVID-19 effects drove activity as Australian investors sold off financial assets and sought liquidity from financial intermediaries. This was particularly prominent in investment funds and superannuation.

Figure 26: Australian offshore investment (portfolio)

Figure 26: Australian offshore investment (portfolio)

Line chart with 7 data points.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying AUD (mill). Data ranges from -16900 to 27598.
End of interactive chart.

Source: 5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2020


Foreign investment fell as foreign holdings of Commonwealth Government Securities (CGS) fell significantly. Contributing to this was CGS and other debt securities purchased by the RBA to inject liquidity into the Australian market and exercise yield control.

Figure 27: Foreign investment in Australia (portfolio)

Figure 27: Foreign investment in Australia (portfolio)

Line chart with 7 data points.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying AUD (mill). Data ranges from -44333 to 37029.
End of interactive chart.

Source: 5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2020


While Australian long-term debt instruments, denominated in foreign currency, increased in value (Figure 28) as the AUD depreciated, Australia’s overall financial position remained steady as this debt was hedged back to AUD (Figure 29).

Figure 28: Foreign investment – bank, long term debt liabilities

Figure 28: Foreign investment – bank, long term debt liabilities

Line chart with 7 data points.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying AUD (billion). Data ranges from -9.7 to 32.7.
End of interactive chart.

Source: Survey of International Investment, Australia

Figure 29: Australian investment – bank, derivatives

Figure 29: Australian investment – bank, derivatives

Line chart with 7 data points.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying AUD (billion). Data ranges from -9 to 36.7.
End of interactive chart.

Source: Survey of International Investment, Australia


Notwithstanding the effects of COVID-19 and Tropical Cyclone Damien, Australia recorded the fourth successive quarterly current account surplus (CAS) in the March quarter 2020. The CAS was generated from a trade surplus of $19.2 billion and a net income deficit of $10.6 billion (current price, seasonally adjusted).

Figure 30: Current account, current price, seasonally adjusted ($b)

Figure 30: Current account, current price, seasonally adjusted ($b)

Combination chart with 4 data series.
The chart has 1 X axis displaying .
The chart has 2 Y axes displaying values and values.
End of interactive chart.

Source: 5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2020

Government

During the March quarter, both the catastrophic bushfires and the unfolding COVID-19 pandemic had significant impacts on the usual expenditure and revenue patterns observed in the public sector.

5.1 Natural disaster relief spending climbed in response to the bushfires

The bushfires and associated smoke haze affected many Australians in the March quarter 2020, with widespread disruption of economic activity and demand for additional services.

The Australian Defence Force was deployed to clear roads, repair damaged infrastructure, assist bushfire coordination and evacuate areas isolated by bushfires. The 1.1% increase in total spending on national defence was partly driven by this increase in defence activity.

The National Bushfire Recovery Agency was established on 6 January 2020 to coordinate bushfire relief and administer the initial $2 billion allocation for the bushfire recovery fund. The 1.7% increase in national non-defence government expenditure was partly driven by the activity of this new agency. Expenses related to firefighting and bushfire recovery in NSW and Victoria also grew significantly in the quarter, leading to a total state and local government expenditure increase of 1.9%.

Figure 31: Government final consumption expenditure by sector, quarterly change, volume measures: seasonally adjusted

Figure 31: Government final consumption expenditure by sector, quarterly change, volume measures: seasonally adjusted

Bar chart with 2 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from -2 to 2.8.
End of interactive chart.

Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – COVID-19 impacts on health activity
 

5.2 Government healthcare spending fell with fewer GP visits and elective surgeries

Australian governments worked to ensure that the health system could cope with the escalating COVID-19 outbreak. Additional funding was allocated to boost emergency response and intensive care capabilities, as well as shifting resources from elective surgeries, to increase hospital capacity for a possible surge in coronavirus cases.

The National Medical Stockpile was boosted significantly with purchases of medical supplies such as pharmaceuticals, personal protective equipment (PPE) and respirators.

Governments also expanded frontline services with additional call centres and helplines, pop-up testing clinics, as well as significant advertising and training programs. These were part of the Government’s $2.4 billion health package to protect Australians from COVID-19.

Fewer General Practitioner visits and a reduction in elective surgeries saw a reduction in Medicare Benefit Scheme (MBS) payments. Aged care payments were also lower in the March quarter, with anecdotal evidence suggesting that the swift response from aged care facilities to protect residents from the emerging pandemic had flow-on effects to people's willingness and ability to move into residential aged care. Partially offsetting these falls was an increase in payments made under the Pharmaceutical Benefit Scheme (PBS), as people refilled existing prescriptions in anticipation of shortages of supply.

This spending across all levels of government resulted in total Government Final Consumption Expenditure (GFCE) increasing by 1.8%.

Public health care spending rose reflecting a range of government measures to increase frontline services and boost hospital capacity in response to COVID-19. However, cancellation of elective surgeries and reduced demand in allied health saw a fall in private health care. As a result, gross value added for Health care and social assistance fell by 0.1% in the March quarter, the weakest quarterly result since December 2011.

Figure 32: Gross value added, health care and social assistance, volume measure: seasonally adjusted

Figure 32: Gross value added, health care and social assistance, volume measure: seasonally adjusted

Combination chart with 2 data series.
The chart has 1 X axis displaying .
The chart has 1 Y axis displaying %. Data ranges from -0.1 to 8.4.
End of interactive chart.

Source: 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Mar 2020 – COVID-19 impacts on health activity

Conclusion

The challenging conditions of the March quarter caused households, businesses and the government to respond in a variety of ways. These responses were seen in the economic statistics produced by the ABS. This article brings together the key economic statistics stories of the March quarter 2020 and the ABS will publish a similar overview after the release of the June quarter 2020 national accounts.

Previous catalogue number

This release previously used catalogue number 1016.0.