Aust economy outperforms rest of world
By Colin Brinsden, Economics CorrespondentWed Sep 2 22:39:13 EST 2009
Wed Sep 2 12:39:13 UTC 2009
CANBERRA, Sept 2 AAP - The Australian economy grew at its fastest pace in more than a year in the three months to June, buoyed by the federal government's stimulus measures and near record-low interest rates.
Australia is in better shape than other major advanced economies which have suffered at the hands of the global recession, but economists say this means the Reserve Bank of Australia (RBA) is likely to lift interest rates sooner rather than later.
While obviously relieved that growth was positive for a second consecutive quarter, after one negative quarter late last year, the government was cautious about being too optimistic.
"The global economy is not out of the woods yet by a long stretch and this economy, Australia's, is an integral part of the global economy, that's why we have implemented this nation building for recovery plan," Prime Minister Kevin Rudd told reporters in Perth.
"With the stimulus ... Australia is now the only advanced economy in the world to have produced positive growth over the last 12 months, which is why, generally, our unemployment rate is better than most other economies."
The June quarter national accounts released on Wednesday showed gross domestic product (GDP) grew by a solid 0.6 per cent, three times larger than the 0.2 per cent economists had forecast after this week's dour economic readings.
It also outpaced the 0.4 per cent growth seen in the March quarter, although it still left annual growth at a slim 0.6 per cent.
Treasurer Wayne Swan said the data painted a picture of a "still weak but very resilient Australian economy".
But, he said, it was not the time to cut back on the government's stimulus.
"Ripping out the stimulus now as the opposition is proposing would pull the rug out from the recovery, dramatically impact upon confidence and would cause higher unemployment," Mr Swan told reporters in Canberra.
He said the government's stimulus measures had boosted consumption and infrastructure spending and had a positive impact on the economy following the withdrawal of private investment.
"As global recovery comes through, we believe we have calibrated our investment profile to chime in with what is, hopefully, going to happen in the global economy over the next six months or so," he said.
While welcoming the GDP result, opposition treasury spokesman Joe Hockey said it was further evidence of the solid foundations set by the former Howard government.
He said the figures were also a "warning bell" for Mr Rudd to stop the heavy spending.
"If you throw enough money at a problem some of it will stick, and it's good, it's good for Australia," he told reporters in Sydney.
"But now Mr Rudd has to pull back on the spending ... because it will be political spending, not economic spending."
The economic rebound is stronger than what the RBA had predicted in its revised forecast made only last month when it expected annual growth of only 0.25 per cent as of June.
"The RBA is likely to be feeling increasingly uncomfortable with the `emergency' setting of the cash rate given Australia's status as a clear growth outperformer," RBC Capital Markets senior economist Su-Lin Ong said.
While not anticipating a 25 basis point rise in the cash rate until November, Ms Ong believed there was a risk of an October hike "especially if the domestic and global data continue to surprise on the upside".
The RBA left the cash rate at a 49-year low of 3.0 per cent for a fifth straight month after Tuesday's board meeting, saying the current setting was appropriate "for the time being".
Business also welcomed the GDP result, but said there was nothing in the data to suggest it was time to lift interest rates.
"An early increase in interest rates is going to put a recovery at some risk," Australian Chamber of Commerce and Industry chief Peter Anderson said.
