(Bloomberg) -- Australia’s economy bounced back to growth in the three months through September with households resuming spending as restrictions eased, underscoring the Reserve Bank’s view that the nation has turned the corner.Gross domestic product expanded 3.3% from the second quarter, when it tumbled by 7%, the Australian Bureau of Statistics said in Sydney Wednesday. Economists had forecast a 2.5% expansion. From a year earlier, the economy shrank 3.8% versus an estimated 4.4% contraction.“We are now expecting GDP growth to be solidly positive in both the September and December quarters,” RBA Governor Philip Lowe told a parliamentary panel in Canberra today. “These figures, though, cannot hide the reality that the recovery will be uneven and bumpy and that it will be drawn out. Some parts of the economy are doing quite well, but others are in considerable difficulty.”The renewed expansion shows how resilient the economy was outside the southeastern state of Victoria, which was under one of the world’s toughest lockdowns for much of the period. The RBA and government delivered significant stimulus early in the pandemic to help households and firms.The Australian dollar rose after the report, before edging back down to trade at 73.69 U.S. cents at 12:49 p.m. in Sydney.What Bloomberg Economics Says“Australia’s recession has ended, but the effects of the recession will take a long time to unwind. The rebound in 3Q recovered around 40% of the decline in output over 1H 2020, an impressive outcome given 25% of the economy remained locked down. The continued easing of restrictions over 4Q means the kick to growth from the normalisation of activity will be a key driver of GDP outcomes in 4Q 2020 and 1Q 2021. A recovery in private sector investment will be key to sustained growth beyond that point.”\-- James McIntyre, economistVictoria, which accounts for about 25% of GDP, was hit hard by efforts to contain a renewed outbreak of the virus. Its lockdown slashed A$100 million ($73.8 million) a day from activity and resulted in an average of 1,200 daily job losses across the state during August and September, Treasury estimated.“Victoria’s final demand fell 1%, the only state to record a decline, driven by decreases in household spending and investment,” the ABS said. “More stringent restrictions associated with the second lockdown resulted in a 9.8% fall through the year. Household spending declined 1.2% in September quarter.”Australia’s unemployment rate currently stands at 7% and the central bank expects it to climb closer to 8% as more Victorians return to the labor market hunting for jobs. At the same time, the return to growth brings an end to Australia’s first technical recession -- defined as two consecutive quarters of contraction -- in nearly 29 years.Today’s report showed:Household spending surged 7.9%, adding 4 percentage points to GDP; government spending rose 1.4%, contributing 0.3 percentage pointNet exports subtracted 1.9 percentage points from GDP, the largest detraction since September quarter 1980The savings rate eased to 18.9.% from an upwardly revised 22.1% in the second quarter, as government cash handouts and a dearth of spending options prompted households to repair their balance sheetsCompensation of employees rose 2.3% as hours worked increasedAustralia’s record run of avoiding two consecutive quarters of negative GDP had included avoiding recessions during the 1997 Asian Financial Crisis, the Dot-Com Bubble and the 2008 global financial crisis. With rates now near zero and the central bank running a quantitative easing program, it has rejoined the rest of the developed world in its policy struggles.The RBA and government are working in tandem to try to support the economy, with the former last month enacting further stimulus that included reducing interest rates to 0.10% and initiating a A$100 billion bond-buying program.“The board will continue to review the details of this package at our future meetings. We are prepared to do more, if that is required,” Lowe told lawmakers. “Having said that, we are still of the view that a negative policy interest rate in Australia is extraordinarily unlikely, with any benefits being outweighed by the costs.”Wednesday’s report showed private investment fell 0.2% as increased housing investment activity was offset by weaker business investment.“Ownership transfer costs increased 21.4%, as housing market activity rebounded,” the ABS said. “Renovations and home improvements activity drove a 5.1% rise in alterations and additions.”Australia has benefited from China’s stimulus to revive its economy this year, which has fueled commodity prices, helping the country to its sixth successive quarterly current-account surplus.Yet the bonanza with China, which takes about 35% of Australian exports, is under a cloud as relations between the two countries deteriorate. Beijing has slapped tariffs on some imports from Down Under, is refusing to take calls from ministers in Canberra, while gloating over alleged Australian war crimes.On top of that, commodity strength and Australia’s better position relative to many developed-world counterparts has sent the currency soaring. It’s up about 30% from a nadir of around 55 U.S. cents in March. One of the motivations behind the RBA’s QE program is to try to cool the Aussie dollar.Still, with households cashed up, the cost of borrowing at historic lows and Covid-19 contained for now, Australia’s economy is set for a much improved 2021. Consumer confidence is surging, hiring strengthening and the housing market is taking off once again.The RBA’s central scenario is for the economy to grow by 5% next year and then 4% over 2022.“It is certainly possible that the economy will do better than our central scenario,” Lowe said today, noting that doesn’t envisage a vaccine being widely available until late next year and significant restrictions on international travel still in place at the end of 2021.“Recent medical breakthroughs give us some hope that things will work out better than this,” the governor said. “If so, confidence would lift and there would be a further easing of restrictions. The result would be an upside surprise to growth and jobs, especially given the significant policy stimulus that is already in place.”(Updates with further detail from 10th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.