SYDNEY • 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, said the Australian Bureau of Statistics (ABS) in Sydney yesterday.
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 that 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 grew 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 lockdowns, and consumers are now spending built-up savings.
The Australian dollar was little changed after the release, trading at 77.6 US cents at 12.07pm in Sydney.
The report showed that 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 households retain plenty of firepower for consumption to keep driving the economy's expansion.
Mr Michael Smedes, head of National Accounts at ABS, said: "Economic activity has recovered to above pre-pandemic levels.
"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, falling to 5.5 per cent in April from a pandemic peak of 7.4 per cent.