Australia’s economy slowed in the first quarter as a government scheme to construct a new building in every school papered over a drop in business spending.
The country’s US$1 trillion economy expanded 0.5 percent from the fourth quarter last year, when growth had rocketed 1.1 percent, according to Australian Bureau of Statistics figures released yesterday. GDP expanded 2.7 percent for the year through March.
Australia’s economy contracted in the last three months of 2008 as the global financial crisis unfolded, but has grown continuously since then from billions of dollars in government stimulus spending.
News of the slowdown in the first quarter comes a day after the central bank kept its key interest rate unchanged following a series of rate hikes, citing increased caution among investors in the wake of Europe’s sovereign debt crisis.
Australian Treasurer Wayne Swan said a government program providing a new building to every Australian school compensated for a fall in private sector spending during the quarter.
Public investment grew 11.6 percent in the March quarter and 39.5 percent for the year. Private investment fell 2.4 percent in the quarter and lost 0.4 percent in the year through March.
Swan said consumer spending had increased 0.6 percent in the latest quarter and was up 3.1 percent over the year before despite the stimulus from government cash handouts to most Australians drying up last year.
He said the Treasury estimated the government’s winding back of stimulus spending had shaved 0.1 of a percentage point off growth for the latest quarter.
“What we see clearly today is that we have an economy that is in transition from the support provided by policy stimulus to private demand,” Swan said before flying to a G20 meeting of finance ministers in South Korea.
Stephen Walters, chief economist at JP Morgan, said the figures indicated a private spending drought in the quarter. He said the surge in public investment had prevented the economy from contracting.
Exports for the quarter fell, but Stephen Halmarick, head of investment markets research at Colonial First State, a wealth management company, expected large increases in exports of energy and minerals would lift growth for the remainder of the year.
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