Public sector expenditure might be the saving grace from preventing a double dip recession to hit the Australian economy.
National account figures set to be released on Wednesday morning are expected to reveal a slow down in economic growth due to Greater Sydney's Delta outbreak which ignited Australia's third wave.
Despite the broad cohort of economists believing gross domestic product will remain positive for the June quarter, Treasurer Josh Frydenberg warned there is no denial elongated shutdowns in NSW and Victoria will damage the economy.
"We have seen 29 days in the June quarter, where we have seen lockdowns," Mr Frydenberg said during question time on Tuesday.
"No matter what the result is tomorrow, the exact number, it doesn't change the fact that today, our economy faces some significant challenges."
The Treasurer's warning of a financial hit is set to be realised in the September national account figures, with some experts believing GDP could slide backwards by up to four percentage points.
NAB Economics downgraded its forecast to a marginal growth in GDP of 0.1 per cent for the June quarter, with a much larger contraction to follow in the current quarter.
Speaking to The Canberra Times, NAB chief economist Alan Oster noted increases in public sector consumption is likely to save the quarter from moving backwards, which would stave off a technical recession.
"We were worried that it might go negative a bit, but the public sector investment was up or 7.4 per cent, so that's pretty strong and I assume a lot of that's Covid-related," he said.
NAB is assuming a 4 per cent negative swing in the third quarter which would bring GDP to minus 3 per cent.
"That means the second half of this year, basically went backwards and that's not what anybody was expecting a couple of months ago," Mr Oster said.
ANZ are predicting a gain of 0.4 per cent growth in GDP, but noted the overall picture on consumption still remains uncertain for the quarter.
"Now, it is certainly possible that it is negative, tomorrow, I don't think we can rule out that possibility," ANZ economist Felicity Emmett said.
"The components that we really don't know a lot about his household consumption so we know what retail trade did, but that's only about 30 per cent of overall household consumption."
Ms Emmet did note early indicators were disappointing, however a near 3 per cent bounce back in hours worked and a 22 per cent rise in job ads were signs the economy was not in negative GDP territory.
"The second quarter national accounts will give important insights into consumer spending behaviour, something which will be key to the strength of the recovery on the other side of this Delta wave."
The ANZ senior economist also agreed the increase in public sector expenditure largely through large government infrastructure programs.
On Tuesday, the Australian Bureau of Statistics revealed Australia's current account surplus in the June quarter rose to $20.5bn compared to the March quarter's $18.9bn, and represents around 3.8 per cent.
The rise in the current account is in despite of a contraction in exports over the period due to impacts to shipments and lower volumes in the resources sector.
Australia's trade surplus did rise by around $3.5b to $28.9b, mostly from a sustained increase in commodity prices, in particular iron ore.
Westpac economist Andrew Hanlan said, "The rest of the world, largely China, is paying us more for our exports.
"Those higher export prices (centred on commodities) are driving a lift in the terms of trade, boosting export earnings and leading to larger trade surpluses."
Mr Oster from NAB also agreed agriculture and mining were the sectors propping up export volumes.
It is widely expected GDP growth will bounce back in the final quarter of 2021, as both Melbourne and Sydney begin easing restrictions, which will likely spruik a bounce back in consumption.
The Reserve Bank anticipates GDP on a year-on-year basis will grow above 4 per cent in 2022 and around 2.5 per cent in 2023.
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