Australia’s Economy Expands More Than Forecast on Consumers, Mining Growth
Australia’s economy grew faster than estimated last quarter on consumer spending and mining-driven investment, spurring the local currency as investors pared bets on the pace of interest-rate cuts next year.
Gross domestic product rose 1 percent in the three months ended Sept. 30, after growing a revised 1.4 percent the prior quarter, the fastest pace in four years, a Bureau of Statistics report released in Sydney today said. The median of 24 estimates in a Bloomberg News survey was for 0.8 percent growth.
The data show the only Group of 10 economy to avoid a recession during the global credit crisis was well placed before Europe’s sovereign-debt crisis intensified, Citigroup Inc. economists said. Reserve Bank Governor Glenn Stevens has lowered rates at consecutive meetings for the first time since 2009, and investors today reduced odds for a 50-basis-point cut on Feb. 7.
“The result should allow RBA Board members to enjoy their Christmas-New Year break,” said Paul Brennan, a senior economist at Citigroup in Sydney. “Economic momentum finished the third quarter solidly and recent cuts in official interest rates should help safeguard sectors of the economy most exposed to short-term cyclical swings until the RBA board next meets.”
The Australian dollar rose after the report, buying $1.0268 at 1:30 p.m. in Sydney from $1.0243 before the data.
Compared with a year earlier, the economy expanded 2.5 percent in the third quarter, today’s report showed. Economists forecast a 1.9 percent year-over-year gain.
Yields on interbank cash-rate futures for the next five months climbed, with the April contract gaining 8 basis points to 3.35 percent, the highest level in almost a month.
Household spending rose 1.2 percent in the third quarter, adding 0.7 percentage point to GDP growth, today’s report showed. Non-dwelling construction jumped 24.4 percent, adding 1.5 points, the report showed. Machinery and equipment advanced 6.4 percent, contributing 0.4 point to the expansion.
China is Australia’s biggest trading partner and its demand for iron ore, coal and energy drove the nation’s terms of trade -- a measure of export prices relative to import prices -- to a record this year.
Mining increased 3.7 percent, adding 0.3 point, today’s report showed.
Resource projects valued at A$456 billion ($468 billion), driven by companies such as BHP Billiton Ltd. (BHP), have cushioned a slump in manufacturing and services hit by a record currency and subdued consumer spending.
Today’s report showed the resource-rich states of Western Australia and Queensland led growth. Western Australia’s economy expanded 8.4 percent last quarter from three months prior, and 16.4 percent from a year earlier. Queensland grew 3.5 percent last quarter and 9.3 percent from the year before.
Private-sector business investment surged 12.9 percent from the prior quarter and 22.7 percent from a year earlier, economists at Australia & New Zealand Banking Group Ltd. (ANZ) and ICAP said.
“The strong investment outcomes are further evidence of the massive pipeline of planned investment in Australia,” Treasurer Wayne Swan said in a statement after the data were released.
The report also showed government spending dropped 1.2 percent, subtracting 0.2 point from GDP growth. Imports rose 4.3 percent, subtracting 1 point.
The nation’s household savings ratio rose to 10.1 percent in the three months through September from 9.1 percent in the second quarter, today’s report showed.
“The Australian economy certainly recorded healthy growth,” said Savanth Sebastian, a Sydney-based economist at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “However, the focus for the Reserve Bank is likely to be the uncertain global economic environment and the downside risks emanating from Europe.”
Stevens, in yesterday’s statement announcing his decision to lower the benchmark rate a quarter percentage point to 4.25 percent, warned of rising risks to global growth.
“The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead,” he said.
Australia’s jobless rate fell to 5.2 percent in October as employment gained by 10,100 workers. Government data tomorrow may show unemployment stayed at that level in November, with the number of workers increasing by 10,000, according to the median estimate of 24 economists surveyed by Bloomberg.
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