What recession?
Australia’s Economic Growth Accelerates to 0.6% (Update1)
By Jacob Greber
Sept. 2 (Bloomberg) -- Australia’s economic growth accelerated in the second quarter on consumer spending, increasing pressure on the central bank to raise borrowing costs from a half-century low.
Gross domestic product rose 0.6 percent from the previous three months, when it grew 0.4 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.2 percent expansion.
Australia’s economy has been “stronger than expected” amid resilient consumer spending, exports and business investment, central bank Governor Glenn Stevens said yesterday after keeping the benchmark interest rate at 3 percent for a fifth month. GDP may expand further in coming quarters as the government spends A$22 billion ($18 billion) on roads, railways and schools.
“Australia’s economy continues to defy the global recession, proving to be more resilient than anticipated,” Bill Evans, chief economist at Westpac Banking Corp. in Sydney, said ahead of today’s report.
Consumer spending advanced 0.8 percent in the quarter, adding 0.5 percentage points to GDP, today’s report said. Exports increased 1 percent, adding 0.2 percentage points to GDP.
The economy grew 0.6 percent from a year earlier, the report showed. Economists forecast a 0.3 percent expansion.
By contrast, Japan’s economy grew at an annual 3.7 percent pace in the second quarter, following an 11.7 percent contraction the previous three months, the U.K.’s GDP dropped 5.5 percent, the most since records began in 1955, and the U.S. shrank 1 percent.
Forecast Changed
Measures of Australian confidence have recovered, and increased construction work and “public demand will also start to provide more support to spending soon and, hence, growth is likely to firm going into 2010,” Governor Stevens said yesterday.
The Reserve Bank scrapped its forecast last month for the economy to contract this year, instead predicting gross domestic product will expand 0.5 percent. The bank expects growth will accelerate to 2.25 percent in 2010 and 3.75 percent in 2011.
Reports this week showed building approvals rose for a second month in July and manufacturing expanded in August for the first time in 14 months. Consumer and business confidence have also surged to the highest levels in almost two years after the government distributed more than A$20 billion in cash to households since the collapse of Lehman Brothers Holdings Inc. almost a year ago.
Woolworths Ltd., Australia’s largest retailer, said last week that profit in the six months ended June 28 jumped 16 percent as demand grew at the company’s supermarkets and Big W discount stores.
Cash Handouts
Still, there are signs the impact from the government’s cash handouts may be waning. Retail sales fell in June, business profits dropped in the second quarter by the most since 2003, company inventories tumbled by a record 3.4 percent from the previous three months and lending by banks and other finance companies to businesses declined in July for a sixth month.
While the central bank’s record 4.25 percentage points of interest-rate cuts between September and April prompted consumers and businesses to bring forward spending plans, “in those areas demand may soften in the near term,” Stevens said yesterday.
“Some types of capital spending are also likely to be held back for a while by financing constraints,” he added.
Rate Outlook
Qantas Airways Ltd., the nation’s biggest airline, said this month it will embark on a A$1.5 billion cost-cutting program after falling demand for travel triggered its first loss in six years.
Traders forecast the central bank’s overnight cash rate target will be 161 basis points higher in 12 months, according to a Credit Suisse Group AG index based on interest-rate swaps at 9:56 a.m. in Sydney.
While inflation should continue “to moderate in the near term,” the likelihood that annual consumer price gains will remain below the bank’s target range of between 2 percent and 3 percent “now looks low,” Stevens said yesterday.
The chain price index, a measure of retail prices, declined 2.2 percent in the second quarter from the previous three months, today’s report showed.
To contact the reporter for this story: Jacob Greber in Sydney at
[email protected]
Last Updated: September 1, 2009 21:36 EDT
