The Australian economy was stronger than expected in the first quarter as exports and consumer spending boosted growth, data showed yesterday, reinforcing the Australian central bank’s decision to keep interest rates on hold after two cuts this year.
The mining-driven economy grew by 0.9 percent in the first three months, above analysts’ expectations of 0.7 percent, to take the annual rate of growth to 2.3 percent, Australian Bureau of Statistics figures showed.
The quarterly growth was an increase from 0.5 percent in the October-December period last year and 0.3 percent in the July-September quarter. However, year-on-year growth slowed from 2.5 percent in the last three months of last year.
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“This is a good, solid result,” Australian Treasurer Joe Hockey told reporters, adding that the expansion was “broad-based.”
“Exports continue to support our economy, growing by 5 percent, and this is the strongest quarterly result in 15 years,” Hockey said.
“There is growth in areas such as tourism, education and professional services,” he added.
The figures came a day after the Reserve Bank of Australia (RBA) kept interest rates steady at 2 percent after cuts of 50 basis points so far this year.
“It’s a good number, but it’s not a game changer for us or the RBA,” JPMorgan economist Tom Kennedy told reporters.
“It’s just more evidence that the Australian economy is now relying on net exports, but growth is recovering after a very weak 2014. We think this year will be better and we think next year is going to be better again,” he said.
Despite the strong headline figures, the income side of the economy remained weak.
Nominal GDP, which is not adjusted for inflation, rose by 0.4 percent for the quarter for an annual rate of 1.2 percent. Real net national disposable income — a measure of the nation’s earnings and which factors in the terms of trade — rose by 0.2 percent quarter-on-quarter to be 0.2 percent lower for the year.
The soft figures were a reflection of the weakening terms of trade, a ratio that measures export prices to import prices, as commodity prices plunge and hurt the resources-dependent economy.
The central bank on Tuesday warned that the economy was continuing to grow below-trend and was “likely to be operating with a degree of spare capacity for some time yet.”
Annual trend growth was estimated to be about 3 percent.
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