The Australian economy last year strengthened, supported by consumer and government spending, with the better-than-expected figures raising hopes the resources-dependent nation is emerging from a slump, data released yesterday showed.
Economic growth expanded 0.6 percent in the fourth quarter of last year to take the annual rate of expansion to a surprise 3 percent, Australian Bureau of Statistics figures showed.
The figures beat market expectations of fourth-quarter growth of 0.4 percent and year-on-year growth of 2.5 percent and sent the Australian dollar jumping almost half a cent to US$0.72.
“Today’s December quarter national accounts show once again that Australia continues to successfully manage the transition from the largest resources investment boom in our history to broader-based growth,” Australian Treasurer Scott Morrison told reporters in Canberra.
“We are growing faster than every economy in the G7, growing well above the OECD [Organisation for Economic Co-operation and Development] average. We are growing faster than the United States and the United Kingdom, more than twice the pace of comparable resource-based economies like Canada,” Morrison said.
The healthy figures were further supported by an upward revision for the growth rate of the third quarter last year from 0.9 percent to 1.1 percent, the strongest quarterly reading since March 2012.
Household spending contributed 0.4 percentage points to the December quarter growth while public gross fixed capital formation — which includes construction and infrastructure spending — added 0.2 percentage points to GDP, the data showed.
The gains were offset by a fall in business spending, which weakened the quarterly growth reading by 0.2 percentage points, as investment in the mining sector continued to soften.
The Australian economy has slowed as the country exits an unprecedented mining investment boom that has helped it avoid a recession for 24 years, with the jobless rate hovering at about a decade high and wage growth and business investment outside the resources sector both tepid.
The Reserve Bank of Australia (RBA) has been trimming interest rates since November 2011, with the last cut in May last year taking it to a record-low of 2 percent, as it sought to boost growth in non-mining sectors.
However, the labor market showed signs of strengthening late last year, while consumers appeared to be more willing to open their wallets amid a booming residential housing sector.
The central bank on Tuesday kept the cash rate on hold, saying it was monitoring the improvement in the jobs market and that there were “reasonable prospects for continued growth in the economy, with inflation close to target.”
The latest readings are better than the RBA’s forecast of 2.5 percent for the whole of last year, and reinforces its stance to stay on the sidelines, economists said.
While the headline figures were healthy, the income side of the economy remained weak, with nominal GDP — which is not adjusted for inflation — at 0.4 percent for the fourth quarter of last year and 2.4 percent the whole year.
The terms of trade, a ratio that measures export prices to import prices, fell 3.2 percent for the quarter to a year-on-year decline of 12 percent, amid weakening commodity prices.
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