Growth Down Under above expectations
AUSTRALIA’S economy outpaced the rest of the developed world in the second quarter according to official data released yesterday, which showed that its economy grew 0.6 per cent in the second quarter compared to the same period in 2008.
On average, economists had expected a rise of just 0.2 per cent and first-quarter GDP growth was unrevised, remaining at 0.4 per cent. Australia is unique in that it has only experienced a contraction in the fourth quarter of 2008 and therefore did not enter a technical recession – two consecutive quarters of contraction.
Wayne Swan, Australian treasurer, said: “We are the fastest growing advanced economy over the past year and the only advanced economy to have recorded positive growth over the past year,”
The Australian Bureau of Statistics (ABS) said that the main positive contributors to expenditures were new machinery and equipment, and household consumption expenditure, each of which added 0.5 percentage points.
Although exports rose due to increased commodity shipments to Australia, net exports fell in the second quarter as consumers chose to purchase imported goods.
The revival in consumer and business spending has been attributed to the aggressive policy stimulus that was implemented.
The Reserve Bank of Australia (RBA) was one of the first banks to hike interest rates in order to curb the excessive consumption that characterised the developed world at the start of the decade. This slowed down a developing housing bubble and encouraged Australians to save more than their American and British counterparts
The RBA cut interest rates sharply last autumn from seven per cent in September to three per cent in April in response to the global financial crisis. And while the RBA kept rates on hold earlier this week, the GDP data is yet another sign that the central bank may be one of the first to hike rates.
Glenn Maguire, chief Asia-Pacific economist at Societe Generale, said that this GDP data will shift the RBA from its neutral bias to a tightening bias, barring any shocks from data over the next few months.