BREAKING NEWS: GDP jumps 0.6% during June quarter

Australia’s rapid recovery gathered pace today with new figures from the Australian Bureau of Statistics showing the economy grew by 0.6% during the June quarter.

CommSec chief economist Craig James said in a statement the figures show the how the government’s stimulus plans have worked, and that Australia now has the strongest economy in the developed world.

“Without a doubt Australia currently has the strongest economy of any developed or advanced nation. While other economies have been wallowing in recession, Australia has defied the global trend.”

“Australian companies have been surprised at how well the economy has held up and have been forced to run down inventories to meet sales. The good news is that manufacturers are already ramping up production to fill orders and restock shelves, boosting the outlook for economic growth.”

Westpac economist Julene Lee said in a statement the figures were “stronger than expected”.

“The fact that Australia avoided a negative number is a major plus. Consumer confidence would have been jolted if the number was negative.”

“A key theme is that government assistance boosted / brought forward private spending – both consumer & business. Another key theme is the resilience of exports despite the global downturn. Export volumes expanded over the last half year, boosted of late by the resurgence of China.”

St George chief economist Besa Deda told Business Spectator the figures show how resilient the Australian economy has remained during the financial crisis.

“It certainly shortens the odds of a rate hike at the end of the year. The resilience has been helped by stimulus measures,” Deda said.

“While some areas may see some pull-back in spending (in Q3 and Q4), it will not cause the Australian economy to go off track.”

But Commonwealth Bank chief economist Michael Blythe also said the result is weak, and below the long-term trend. the economic picture remained weak overall and well-below trend growth.

“[This] is the sort of environment that gives you rising unemployment and slowing inflation,” he said. “So from the Reserve Bank perspective it still seems to fit with the idea that they’ll stay on the sidelines for a while yet.”

ANZ economist Riki Polygenis told The Age that the figures “highlight Australia’s economy outperforming all of its advanced economies peers with the exception of Japan”.

The ABS figures reveal gross domestic product grew by a seasonally adjusted 0.6%, while terms of trade fell by a seasonally adjusted 7.4% and non-farm GDP dropped by 1.1%.

The main contributors to expenditure on GDP were new machinery and equipment at 0.5 percentage points and household final consumption expenditure, also at 0.5 percentage points.

The largest negative contributors to GDP were new building construction, which detracted 0.3 percentage points, and imports, which detracted 0.5 points.

Property and business services added a seasonally adjusted 0.4 percentage points to GDP growth, with agriculture, forestry and fishing detracting 0.4 percentage points.

Total dwellings investment dropped by a seasonally adjusted 5.6% during the quarter, with a 10.9% decline in the year to June. Total gross fixed capital formation jumped 0.7% during the quarter, down by 2.3% over the year.

Domestic final demand increased by 0.8% during the quarter, with a 0.7% rise over the year. Gross national expenditure rose by 1% during the quarter, but actually fell 0.4% over the year.

The Australian dollar also gained ground after the announcement, moving up to US83c.

The figures come after the Reserve Bank of Australia yesterday decided to keep the official interest rate at 3%, saying the economy is maintaining its strength. But today’s figures could see a decision to increase rates before the end of the year.

”Economic conditions in Australia have been stronger than expected, with consumer spending, exports and business investment notable for their resilience,” governor Glenn Stevens said in a statement