Australia's Q1 GDP growth beats forecasts

SYDNEY • Australia's economy entered its 27th year without a recession in the first quarter, due to bumper exports and a jump in business investment, although uncertainty over the outlook for household consumption remains a worry.

The local dollar gained about a quarter of a US cent after the Australian Bureau of Statistics reported gross domestic product (GDP) rose 1 per cent in the first quarter.

That topped market forecasts of a 0.9 per cent gain over the December quarter.

The Reserve Bank of Australia sounded upbeat about future economic growth on Tuesday, but kept interest rates steady at 1.5 per cent in anticipation of a gradual revival in inflation.

Investors suspect policy will stay on hold for a long time to come and interbank futures are not fully priced for a hike until September next year.

AMP chief economist Shane Oliver said: "While the growth number is a good number, (I'm) doubtful it is going to be sustained at this pace. Over the last few years, we have seen several occasions where GDP growth spiked at 1 per cent per quarter only to then fall back in subsequent quarters, and there was a combination of very positive things through this quarter which contributed to that spike.

"We've got very weak consumer spending in the economy on the back of soft wages growth and a continuing decline in house prices in Sydney and Melbourne, which I think will act as a constraint on consumer spending. So my expectation is that growth will settle back down or fall in the subsequent quarters, so therefore it is not going to be sustained at this pace."

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 07, 2018, with the headline 'Australia's Q1 GDP growth beats forecasts'. Print Edition | Subscribe