Australia’s economy expanded a steady 0.6 percent in April to June from the previous quarter, data the ruling Labor Party seized upon yesterday as proof of its credentials just days ahead of elections.
The figure was a slight improvement on the 0.5 percent in the first three months of the year and in line with forecasts of 0.6 percent, while the year-on-year 2.6 percent rate was ahead of market expectations of 2.5 percent.
The Australian Bureau of Statistics (ABS) data thrust economic management back into the election debate as the commodities-powered economy undergoes a painful transition away from mining as a key driver of growth.
Photo: AFP
Australian Prime Minister Kevin Rudd said the figures, which are well below long-term averages of about 3.25 percent, showed Australia’s resilience despite global difficulties and the unwinding of its decade-long Asia mining boom.
“We’ve grown 15 percent over the last five or six years, I draw your attention to the fact that the British economy has shrunk 3 percent over the last six years,” Rudd told reporters as he heads into Saturday’s national vote. “The economic credentials of this nation, run by this government over this period of time, are strong. We now have had in Australia, as a result of strong economic management, 22 years of continued positive growth.”
The conservative opposition — which opinion polls suggest will win — have also focused on the economy, pointing to the current slowdown as evidence Labor has overspent and saying more prudent policies are needed.
The Tony Abbott-led Liberal-National coalition plans to rescind corporate pollution and mining profit taxes that were unpopular with industry and slash public spending, though they are yet to release the full costs and details of their policies.
Rudd said the latest figures showed the importance of government spending as Australia confronts an uncertain transition away from its reliance on mining to other drivers of growth.
Public investment contributed as much to June quarter GDP as consumer spending, which was buoyed by cuts in the official interest rate to a record low 2.5 percent, Rudd said.
“Public investment still, in these difficult global economic circumstances, is a fundamental part of keeping the Australian economy strong and in positive growth territory,” he said. “Pulling the plug on public investment prematurely by massive cuts places continued growth at risk.”
Abbott dismissed Rudd’s claims that his approach risked plunging Australia into recession, noting that the last time the country’s economy hit hard times was under a previous Labor government, repeating his vows to cut taxes.
Analysts said that taxes had little bearing on Australia’s subdued economic performance, pointing instead to China’s marked slowdown, with IMF forecasts 2 percent lower than they were two years ago.
“In our view, changes to tax policy will not be able to prevent mining investment from soon becoming a drag on growth,” Daniel Martin from Capital Economics said.
“We expect growth to slow further over the coming quarters as the economy struggles to cope with cooling mining investment,” he said.
The ABS said the mining, financial and healthcare sectors had been the biggest contributors to Australia’s GDP over the past 12 months.
Exports remained muted, with the terms of trade — a measure of export prices versus import prices — up just 0.1 percent in the quarter, compared with 3.1 percent in the first three months of this year.
Over the past 12 months the ABS said the terms of trade had fallen 4.9 percent, reflecting drops in commodity prices as Asia — particularly key trading partner China — slows and the mining investment boom comes to an end.
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