Australian economy grows more quickly than expected in third quarter

People working in Sydney's central business district on Oct 15.
People working in Sydney's central business district on Oct 15.PHOTO: AFP

SYDNEY (BLOOMBERG) - Australia's economy expanded at a faster pace than economists forecast in the three months ended Sept 30, underscoring the central bank's decision on Tuesday (Dec 1) to keep interest rates steady.

Gross domestic product (GDP) advanced 0.9 per cent from the second quarter, when it rose a revised 0.3 per cent, government data showed on Wednesday. That compared with the median of 28 estimates for a 0.8 per cent gain.

The report spans a period when Australia's currency dropped almost 9 per cent in response to record-low interest rates as the central bank sought to spur investment outside the resources industry. While mining investment continued to fall, earlier spending by resources firms is boosting output that is reflected in surging export volumes of commodities like iron ore.

"Most of the rebound reflects volatility in commodity exports, which fell sharply in the second quarter as weather disrupted shipments and have rebounded," Mr Kieran Davies, chief economist at Barclays and a former Treasury official, said before the release. "The Reserve Bank of Australia is also expecting a rebound."

While export volumes picked up, prices for those commodities have slumped as Chinese demand wanes.

The local dollar was little changed and traded at 73.24 US cents at 11.44am in Sydney from 73.25 cents before the release.

Compared with a year earlier, the economy expanded 2.5 per cent in the third quarter, the report showed. The median forecast of economists was for a 2.4 per cent rise.

Exports surged 4.6 per cent in the third quarter, adding 1 percentage point to GDP growth, the report showed. Household spending rose 0.7 per cent last quarter, adding 0.4 point to the expansion, it showed.

Reflecting the unwinding of resource investment, non-dwelling construction fell 5.3 per cent, subtracting 0.4 per cent from GDP growth, while machinery and equipment dropped 4.6 per cent, subtracting 0.2 per cent.

The nation's household savings ratio fell to 9 per cent in the third quarter from 9.4 per cent three months earlier.