Mining-powered Australia expanded a modest 0.6 percent in the three months to September and 2.3 percent year-on-year, showing a transitioning economy “stuck in second gear,” Canberra said yesterday.
The Australian Bureau of Statistics figures came in short of analyst forecasts of 0.8 percent for the quarter and 2.6 percent annually, underscoring the challenges for the commodity-rich nation as it transitions away from a decade of dependence on mining.
“The fact is the economy is stuck in second gear,” Australian Treasurer Joe Hockey told reporters. “Today’s numbers are a reminder of the tough trading conditions in the economy, particularly outside of the mining sector.”
Hockey said the disappointing data, which saw the Australian dollar fall almost a full US$0.01 from US$0.9135 to as low as US$0.9048, reflected a slowdown in the resources sector.
“The fact is the mining companies are not importing new capital and that clearly illustrates that we have some challenges ahead, as mining investment drops from around 8 percent of GDP to somewhere around 3 percent over the next few years,” he said. “That is going to create a growth hole in the economy.”
Hockey said that the budget had “deteriorated significantly” and the previous government’s pre-election growth forecasts of 2.5 percent for this fiscal year and 3 percent for the next fiscal year would not be met.
The year-on-year growth rate of 2.3 percent was far below long-term averages of about 3.25 percent.
Commodities continued to underpin growth, contributing 0.3 percent to the increase in GDP in the quarter, according to the bureau.
However, Australia’s terms of trade — a measure of export prices versus import prices — fell 3.3 percent in the quarter as commodity prices plunged amid slowing demand from China and new supply flooding the market.
Sectors closely associated with mining activity dropped steeply in the September quarter, weighing on the economy, with non-residential construction down 12.6 percent, wiping 1.3 percentage points from GDP growth.
Machinery and equipment fell 2.4 percent on-quarter, reflecting a sharp slowdown in mining activity as major firms including BHP Billiton Ltd and Rio Tinto Group shelve or scale back projects in a bid to shore up their bottom lines.
Outside the mining sector, Hockey said conditions remained subdued, with household spending muted and dwelling investment falling in the quarter.
He used the data to push the conservative government’s case for a repeal of corporate pollution and mining profits taxes in a bid to “speed up the Australian economy.”
Scrapping the levies was a key plank of Australian Prime Minister Tony Abbott’s election platform, but the Labor-Greens opposition have blocked the initiative in parliament.