Aussie growth surprisingly strong
The imbalance in the Australian economy was highlighted further today, with the mining industry contributing around 80 per cent of the jump in growth.
The Australian economy expanded at a stronger-than-expected rate in the first quarter. The economy grew at a seasonally adjusted 1.1 per cent in the March quarter, with an annual growth rate of 3.5 per cent.
The Australian dollar jumped as high as US92.99c upon the release of the data, before pulling back to 92.84c.
Economists had been expecting quarter-on-quarter growth of 0.9 per cent and year-on-year growth of 3.2 per cent.
The figures were up from a 0.8 per cent expansion in the three months to December.
Seasonally adjusted, the mining industry expanded 8.6 per cent in the March quarter, accounting for around 80 per cent of the headline GDP figure. GDP, excluding mining, grew just 0.3 per cent, according to the Australia Bureau of Statistics.
''Going forward, mining is still going to be strong, but it'll be nowhere near that strong, because in the first quarter we had an usual scenario where not only were mines ramping up production as new output came online, there was a real lack of wet weather and cyclones in the north-west, so that really boosted iron ore exports significantly,'' ANZ senior economist Justin Fabo said.
The Australia economy still faces continuing challenges from the winding back of the mining investment boom and slumping consumer confidence, Deloitte Access Economics economist Chris Richardson said, but there is some good news.
Dwelling investment increased 4.7 per cent in the March quarter, contributing 0.2 percentage points to GDP.
Outside mining, construction and financial services were the bigger contributors to growth.
''There's two broad sources of good news. One is that low interest rates are convincing families to spend more and they're convincing families and builders to build more new homes,'' Richardson said.
''That was always part of the master plan that low interest rates would help fill a pothole left by the winding back of mining related construction,'' he said.
However, there is worry that slumping consumer confidence could lead to poorer economic data in the coming months, putting a further dent in the non-mining economy.
Data was mixed in the lead up to the release.
On Tuesday, the current account deficit narrowed to A$5.67 billion ($6.24 billion), around 1.4 per cent of GDP, but weak April retail sales growth and a slump 5.7 per cent slump in approvals for the construction of new homes gave credence to speculation that growth numbers might be weak.
Sydney Morning Herald