Australia's economy sank by 1.9 per cent in the September quarter as a result of COVID-19 lockdowns in the nation's major states.
The decline was smaller than the 2.5 per cent fall economists had expected.
The Australian Bureau of Statistics said the economy still grew by 3.9 per cent over the year.
"Domestic demand drove the fall, with prolonged lockdowns across NSW, Victoria and the ACT resulting in a substantial decline in household spending," ABS acting head of national accounts Sean Crick said.
"The fall in domestic demand was only partly offset by growth in net trade and public sector expenditure."
Gross domestic product in the September quarter was 0.2 per cent below the pre-pandemic level in December quarter 2019.
Meanwhile, Australia's manufacturing industry rebounded in November after several months of flat results due to the restrictions imposed to battle the Delta variant of the coronavirus.
The Australian Industry Group performance of manufacturing index rose by 4.4 points in November to 54.8, and firmly above the 50 point mark that separates expansion in the industry from contraction.
"With restrictions easing, performance improved across the manufacturing sectors," Ai Group chief executive Innes Willox said on Wednesday.
However, with manufacturers operating at relatively high capacity, they continue to voice concerns about reliability of supply inputs and the difficulty in filling new positions due to worsening skill shortages and localised labour shortages.
"While input prices remain high and wages growth has firmed, market conditions are supporting some recovery of higher costs in market pricing of manufactured goods," Mr Willox said.
