- Australia's resource-rich economy expanded at twice the pace expected by economists
- Gross domestic product advanced 1.3 percent from the previous quarter
- Was the fastest acceleration in economic growth in five years
Australia's resource-rich economy expanded at twice the pace expected by economists in the first quarter of 2012, lifted by an unexpected increase in household spending and continued heavy investment in mining projects.
Gross domestic product advanced 1.3 per cent from the previous quarter, when it rose a revised 0.6 per cent, according to the Australian Bureau of Statistics. This was well above market expectations of a 0.6 per cent rise and, excluding the quarter that followed the 2011 flooding in Queensland, was the fastest acceleration in economic growth in five years. In annual terms, GDP growth in the year to March was 4.3 per cent.
The strong reading came a day after the Reserve Bank of Australia lowered its benchmark interest rate to 3.5 per cent -- the lowest level in almost three years -- because of "moderate domestic growth" and a "weaker and more uncertain international environment".
Wednesday's report showed capital expenditure in the mining sector up 14 per cent in the first quarter of the year, and the main driver of a 20 per cent increase in private infrastructure investment. But it was a 1.6 per cent rise in household spending during the quarter that surprised the market.
"Despite their negativity about a lack of wealth growth and cost of living increases, the consumer is spending money," said UBS economist Scott Haslem.
Treasurer Wayne Swan hailed the figures as "stunning" and said they showcased the "rock-solid economic fundamentals" that put Australia in a "league of its own".
"This is a remarkable outcome and reaffirms Australia's position as one of the strongest economies in the world, with the Australian economy growing faster than every single major advanced economy in the March quarter," said Mr Swan.
But economists said the data, which preceded the latest bout of global economic worries, might prove to be the growth peak for Australia, and highlighted the unevenness in growth between the mining and non-mining sectors of the economy.
Final demand -- a measure of spending in the local economy by the private and public sectors -- in the mining centres of Western Australia and Queensland rose 13.6 per cent and 7.8 per cent year-on-year respectively, compared with 2.1 per cent in New South Wales and 1.9 per cent in Victoria.
"The result is very likely to be the high water mark for growth, with more cautious households, further declines in dwelling activity, and much bleaker offshore conditions, which will be an ongoing drag on export volumes, to compromise growth from here," said JPMorgan economist Stephen Walters.
"Despite the upbeat headline outcome, the picture painted today still is one of an economy not quite firing on all cylinders. Output from the miners, for example, bounced 2.3 per cent quarter-on-quarter and other industries turned in decent performances. Manufacturing output, however, dived another 0.8 per cent quarter on quarter (the sixth decline in the last eight quarters)", noted Mr Walters.
However, the Australian dollar rallied following the release of the report, rising 1 per cent to $98.40 cents as forecasts for further rate cuts were revised.
"The market's expectation for a terminal cash rate around 100 basis points below the current level is not compatible with the resilience of the Australian economy," said Citigroup economist Paul Brennan.