Despite “solid result” in economic growth for March quarter, challenges ahead
Economic growth was stronger than expected in the first quarter of the year, as per the results of the Australian Bureau of Statistics. Yesterday’s figures showed a 0.9% rise in seasonally adjusted GDP, which was 0.2% higher than market expectations.
The quarterly growth saw an increase from the October-December and July-September quarters last year at 0.5% and 0.3% respectively, prompting Treasurer Joe Hockey to declare the figures as a “good, solid result.”
The annual rate of growth is reported at 2.3%, boosted by increased exports, which added 0.5% to growth and increased household and government spending adding 0.3% and 0.1% respectively to the final growth figures.
“Exports continue to support our economy, growing by 5% and this is the strongest quarterly result in 15 years...There is growth in areas such as tourism, education and professional services, which are set to become increasingly important drivers of growth in the future,” said Treasurer Hockey in a press conference.
The economic report card for the March quarter also revealed that gross fixed capital formation, a measure of investment, dipped by 0.4%, with similar results in non-dwelling construction which was down by almost 5%. A further decline in housing loan approvals could foreshadow that the boost housing construction has been delivering to economic growth could be slowing.
In response to the GDP news there was a half a cent increase in the value of the Australian dollar to just over US78c, which is on top of the already a cent and half increase since the Reserve Bank announced that they were leaving the cash rate unchanged on Tuesday.
National Australia Bank chief markets economist Ivan Colhoun told the AFP that the RBA was “not cutting interest rates anytime soon” but is waiting on more data on the economy’s possible recovery and the impact of their last two cuts.
“This data suggests that it might not be quite as weak as they’ve been fearing. But they’re also not going to change their mind quickly that mining investment is going to be quite weak next year,” he told the AFP.