Australia's GDP growth beats forecasts

PUBLISHED : Thursday, 06 March, 2014, 1:20am
UPDATED : Thursday, 06 March, 2014, 1:20am

Australia's economy expanded faster than analysts forecast in the past quarter on rising household spending and lower savings, as the central bank's bid to spur consumption-led growth bore fruit.

Fourth-quarter gross domestic product rose 0.8 per cent from the previous three months, beating the 0.7 per cent median of 28 analysts' estimates. The savings rate fell to 9.7 per cent, the first time it has dropped below 10 per cent since 2010.

Policymakers are trying to manoeuvre the economy through the fading of a resource-investment boom that helped the nation avoid recession during the global financial crisis. The Reserve Bank of Australia has cut borrowing costs by 2.25 percentage points since late 2011 to a record-low 2.5 per cent, helping drive up house prices and building approvals.

"The clearest message from these national accounts is that the rebalancing act is under way, and that will be a great comfort for the [Reserve Bank]," said Paul Bloxham, the chief Australia economist at HSBC. "Rate cuts are off the table. Indeed, the evidence is starting to build that interest rates may have to rise before the end of the year."

Compared with a year earlier, the economy grew 2.8 per cent in the quarter, yesterday's report showed. The median forecast was for a 2.5 per cent rise.

Household spending rose 0.8 per cent, adding 0.4 percentage point to GDP growth, while exports grew 2.4 per cent, adding half a point. Machinery and equipment fell 8.8 per cent, taking 0.4 point off.

Household savings ratio fell to 9.7 per cent, from a revised 10.6 per cent in the third quarter.