Treasurer concedes Australia will pay interest on bonds held by Russia

Treasurer Josh Frydenberg has revealed Russia holds $8 billion in Australian Treasury bonds, conceding the Australian Office of Financial Management would continue to pay interest on those securities to prevent default.

The admission of Russia's limited holding of Australian government securities coincided with warnings from the Treasurer that the unfolding Ukraine crisis and major flooding across the east coast of the country would impact economic growth over the first quarter of 2022.

Mr Frydenberg confirmed European clearing house Euroclear, which administers the payable interest, was not passing on payments to Russia due to sanctions imposed by the European Union.

"Australia is going to restrict the ability of Australians and Australian institutions to deal with the Russian Central Bank," he said.

"That constrains their ability to deal with their foreign reserves, whether that be the $8 billion of Australian bonds or otherwise. Other countries are doing the same."

Mr Frydenberg said Russia's holding of Australian bonds came up in discussion with US Treasury Secretary Janet Yellen, following statements by the US and the EU which are looking to restrict Russia's access to its foreign reserves.

At the domestic level, Mr Frydenberg noted ongoing impacts to the economy from the crisis would likely take the form of further global supply chain disruptions and further increases in petrol prices.

"Both the floods and the developments in Ukraine will impact the Australian economy," he said.

"However, [Wednesday's] national accounts again demonstrate the enormous strength and the resilience of our economy, even in the face of the biggest economic shock since the Great Depression."

The latest national accounts figures showed the economy bouncing back to pre-pandemic levels, with gross domestic product for the December quarter of 2021 rising 3.4 per cent.

Annual GDP rose 4.2 per cent and was spurred on by greater household consumption, particularly in the ACT, NSW and Victoria, which eased lockdown restrictions.

All three jurisdictions recorded spending rises of 9.6 per cent while non-lockdown states only rose 1.6 per cent.

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Household consumption was partly offset by a 1.4 per cent fall in private investment, which was being impacted by shortages in construction supplies and labour.

Increased spending in the economy led to a fall in the household savings ratio from 19.8 per cent to 13.6 per cent.

Trade fell by 5.1 per cent due to strong growth in import prices, which jumped 5.8 per cent. Export prices, however, only rose 0.4 per cent over the quarter.

Net trade deducted 0.2 percentage points from GDP, while real net disposable income rose 1.7 per cent.

Ernst & Young chief economist Jo Masters said the GDP figures pointed to a strong rebound, but highlighted a "lumpy" recovery and a reliance on household spending.

She also noted that how households respond to increasing inflationary pressures in 2022 will be a crucial factor when it comes to future growth.

"There's no doubt that the household sector is cashed up and keen to spend. The household saving rate fell to 13.6 per cent from 19.8 per cent, as income fell and spending rose," Ms Masters said.

"Looking ahead, how far consumers are willing to tap those savings is critical and will depend on confidence.

"A strong labour market and high job security should provide some confidence against some of the other factors on consumers' minds."

Labor's treasury spokesman, Jim Chalmers, said the national account figures showed business investment in Australia had dropped, and there were increasing pressures on the cost of living.

Compensation to employees over the quarter rose 2 per cent, reflecting further tightening of the labour market, which puts upward pressure on wages.

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