The Australian economy's expansion slowed in the June quarter compared to three months earlier and ahead of a widely expected sharp deterioration caused by coronavirus lockdowns, particularly in NSW and Victoria.
The national accounts released on Wednesday showed the economy grew by 0.7 per cent in the June quarter compared with an upwardly revised 1.9 per cent expansion in the March quarter.
"The moderation was inevitable, many of the easy wins from relaxing restrictions and re-opening the economy had already been taken, but momentum was slightly stronger than expected," BIS Oxford Economic chief economist Sarah Hunter said.
ABS head of national accounts Michael Smedes said domestic demand drove the expansion in the quarter which saw continued growth across household spending, private investment and public sector expenditure."
However, exports detracted from the growth result.
"Lockdowns had minimal impact on domestic demand, with fewer lockdown days and the prolonged stay at home orders in NSW only commencing later in the quarter," Mr Smedes said.
The annual growth rate was a whopping 9.6 per cent reflecting the economy's past glories of a strong recovery from last year's recession and as the steep seven per cent contraction seen in the June quarter 2020 dropped out of the equation.
"These numbers confirm Australia's economy was slowing even before the Sydney lockdown as a direct consequence of Scott Morrison's failures on vaccines, quarantine, and the economic supports," shadow treasurer Jim Chalmers told AAP.
Economists expect a steep contraction in the September quarter.
"The national accounts data is inherently backward-looking, and this is particularly true at the moment given the ongoing lockdowns in NSW, Victoria and the ACT," Dr Hunter said.
"Economic activity has clearly been severely disrupted, and it is likely that the national economy will contract by around three per cent in the September quarter as a result."
The solid recovery in Australia's manufacturing sector all but ground to a halt in August as a result of coronavirus lockdowns in the nation's two most populous states.
The Australian Industry Group's performance of manufacturing index tumbled 9.2 points to 51.6 in August, holding only just above the 50-mark which separates expansion in the sector from contraction.
Ai Group chief executive Innes Willox said lockdowns across the country, particularly in NSW and Victoria, had a major impact on manufacturing, although ongoing strength outside of these states was strong enough maintain to the index in positive territory.
"Looking forward, there was positive news in the further growth in new orders in August and the easing of restrictions on construction will go some way to rebuilding confidence or at least hope among its suppliers," Mr Willox said.
Businesses more broadly want certainty that the economy will reopen later this year and state border closures become a thing of the past.
Eighty leading companies, which employ almost one million employees, have signed an open letter to state and federal leaders calling on them to stick to the national COVID-19 recovery plan.
The plan targets double-dose vaccination rates of 70 and 80 per cent among Australians aged 16 and above as stages to end lockdowns and open up both internal and international borders.
The double-dose vaccination rate is at just over 35 per cent.
