Australia marks 25 years of unbroken economic growth370 views
SYDNEY: Australia’s economy is growing at its fastest annual rate in four years, the government said Wednesday, as it trumpeted a quarter of a century of continued expansion.
Growth hit 3.3 per cent from a year earlier in the second quarter of 2016, with government spending helping to offset falling trade as the economy shifts away from a decades-long resources-led boom.
In the three months to the end of June, it expanded 0.5 per cent with Australia now not seeing a recession since 1991, making it one of the developed world’s best-performing economies.
“It’s official, Australia has now achieved 25 years of uninterrupted economic expansion,” Treasurer Scott Morrison said.
But while there was “much to welcome in these accounts today”, he also warned it was no time for complacency.
“We continue to fight for every inch of growth in a very challenging world economy,” he said.
A bumper quarter-on-quarter 1.0 per cent expansion in the January-March period was driven by trade and household spending, but falling exports — a key growth engine — were a drag for the April-June number.
Over the three months, they took 0.2 per centage points from GDP, but were offset by a 1.9 per cent rise in government spending, and a whopping 15.5 per cent jump in public investment.
Consumer spending also grew, but its 0.4 per cent quarterly rise was the smallest in three years — a possible indicator that low wage growth was starting to bite.
The Australian dollar, which climbed ahead of the data, fell slightly after the announcement to 76.58 US cents but soon recovered, clinging on to gains made overnight after soft US data raised doubts about an imminent US rate hike.
Capital Economics’ chief Australia economist Paul Dales said the quarterly growth was “a good result” and should ease pressure for further interest rate cuts.
“The return of the Australian economy in the second quarter to the growth rates seen before the end of the mining boom relieves some of the pressure on the (central bank) to cut interest rates again, at least in the next few months,” he said.
But he added that stubbornly low inflation, which fell to a 17-year low of 1.0 per cent in April-June, may still prompt a rate cut to 1.0 per cent next year.
The Reserve Bank of Australia on Tuesday held the cash rate steady at a record low of 1.50 per cent, having eased twice in the past four months in a bid to boost prices.
National Australia Bank economists said in a note that Wednesday’s data “continues to suggest reasonable growth across the non-mining economy, despite some modest loss of momentum”.
“We do not expect any near-term shift in monetary policy, but retain our view that two cuts will follow in mid-2017 in response to the ongoing weak inflation and risk that the economy slows too sharply in 2018,” they said.
Courtesy Economic Times