SYDNEY (BLOOMBERG) - Australia's economy expanded faster than economists forecast in the first three months of the year, driven by the private sector as firms boosted investment and households tapped their pandemic savings war chest.
Gross domestic product (GDP) advanced 1.8 per cent from the final quarter of last year, when it rose a revised 3.2 per cent, the Australian Bureau of Statistics said in Sydney Wednesday.
Economists had forecast a first-quarter gain of 1.5 per cent. From a year earlier, the economy expanded 1.1 per cent versus an estimated 0.6 per cent increase.
"The private sector did all of the heavy lifting," said BIS Oxford Economics chief economist Sarah Hunter, adding the report "also confirms that households are now pivoting their spending back towards services".
She noted that hotels and dining climbed almost 15 per cent quarter on quarter, transport services rose 8.8 per cent and recreation and culture 3.3 per cent.
Australia's rapid rebound has been underpinned by its ability to limit Covid-19 to isolated flare-ups, boosting consumer and business confidence. A massive fiscal-monetary injection strengthened the financial position of households and firms during the lockdown, and consumers are now spending savings built up.
The Australian dollar was little changed after the release, trading at 77.6 US cents at 12.07pm in Sydney.
Today's report showed:
- Household spending rose 1.2 per cent, adding 0.7 percentage point to GDP; while government consumption slid 0.5 per cent, cutting 0.1 percentage point
- Private investment advanced 5.3 per cent, adding 0.9 percentage point, and dwelling investment increased 6.4 per cent, its third straight quarterly gain
- Among the declines were non-dwelling construction, falling 1.1 per cent and cutting 0.1 percentage point from GDP; net exports shaved 0.6 percentage point from GDP
- The savings rate slid to 11.6 per cent in the first quarter from an upwardly revised 12.2 per cent in the fourth quarter last year; Australia's still-elevated savings rate suggests that households retain plenty of firepower for consumption to keep driving the economy's expansion
"Economic activity has recovered to be above pre-pandemic levels," Mr Michael Smedes, head of National Accounts at the ABS, said in a statement. "Machinery and equipment investment recorded its strongest quarterly rise since December 2009, driven by the continued improvement in business confidence and support from government tax incentives."
Unemployment in Australia has steadily declined as the recovery gathered pace, reaching 5.5 per cent in April from a pandemic peak of 7.4 per cent.
Some pandemic support has now been withdrawn, such as loan repayment deferrals and the government's JobKeeper wage subsidy that expired just before the end of the first quarter. Treasury Secretary Steven Kennedy said in testimony on Tuesday that partial data showed that around 56,000 workers had lost their jobs in the four weeks following the conclusion of JobKeeper on March 28.
A potential risk to the outlook is Australia's sluggish roll-out of a Covid-19 vaccine, which has been heightened by a renewed outbreak of the virus in Melbourne that prompted a lockdown in the nation's second-largest city.
"An important ongoing source of uncertainty is the possibility of significant outbreaks of the virus, although this should diminish as more of the population is vaccinated," Reserve Bank of Australia governor Philip Lowe said on Tuesday after keeping stimulatory policy settings in place.
Australia's government and central bank have worked closely to support the economy through the pandemic. Treasurer Josh Frydenberg unveiled further stimulus measures in his May budget, joining forces with Dr Lowe in trying to push the economy to maximum employment and revive sluggish inflation.
The central bank is due to decide next month on rolling over its yield target to a later maturity and whether to extend its quantitative easing program.