Australia grows by 0.6%

Mar 06, 2013 12:00 AM

Australia's economy grew 0.6 percent in the three months to December thanks to a pick-up in exports but analysts warned the country's mining boom covered up weakness in other sectors.

The bureau of statistics said the quarter-on-quarter expansion followed a 0.7 percent gain in the September quarter, and resulted in a 3.1 percent annual growth rate in 2012, compared to 2.3 percent in 2011.

Treasurer Wayne Swan said the numbers represent “21 continuous calendar years of growth for Australia, which is a record unmatched by any other advanced economy over this period”.

He also hailed a 3.3 percent rise in exports in the three months to December as “the second-fastest quarterly increase in almost a decade” as coal and iron ore shipments rebounded, making them the largest contributor to growth.

The mining, manufacturing, health and finance sectors were the main drivers of growth in the quarter, each contributing 0.1 percentage points to the increase in GDP, the bureau said.

The plunge in Australia's terms of trade - the value of its exports against its imports - slowed to 2.7 percent from 5.3 percent in the previous quarter, suggesting conditions were improving in the key mining sector.

However, tepid consumer spending growth of 0.3 percent - after 0.2 percent in the three months to September - indicate there are still imbalances in the economy.

The Reserve Bank of Australia left rates at their global financial crisis lows of 3.0 percent Tuesday, hoping to stoke non-mining areas of the economy as resources sector investment approaches its peak, requiring a rebalancing of the economy.

Swan conceded that the “transition from mining to non-mining drivers of growth may not be seamless” but that Australia's economy continued to outstrip “every major advanced economy and the vast bulk of the developed world”.

“Australia's around-trend growth rate over the year is more than four times the OECD average,” said Swan.

HSBC economist Paul Bloxham said: “Household consumption was particularly weak, investment slowed down a bit but we did see a strong contribution to the economy from net exports, as coal and iron ore exports ramped up.”

However, he added: “We think the soft patch these figures represent is behind us and that growth will pick up in the first half of this year.”

Canberra has flagged growth of 3.0 percent for the fiscal year ending June 30, although the RBA puts it at a more moderate 2.5 percent for the same period.

The Australian dollar nudged up slightly to US$1.0275 from US$1.0266 prior to the data, while the stock market also pushed higher.

Swan said food and car sales grew strongly in the December quarter but he described households as cautious overall, with an emphasis on saving rather than spending and the bullish Australian dollar weighing on local investment.

Central bank governor Glenn Stevens noted that investment outside the mining sector remained “relatively subdued” and the exchange rate was inflated, suppressing local industries like tourism, manufacturing and education.

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