Aust Economy Grows At Moderate Pace
March 5th, 2013
THE Australian economy recorded slower growth at the end of 2012 but economists expect it to pick up steam this year.
Gross domestic product (GDP) expanded 0.6 per cent in the December quarter as higher export volumes offset weakness elsewhere, figures released by the Australian Bureau of Statistics show.
The economy expanded 3.1 per cent in 12 months to December, due to stronger growth in the first half of the year.
"Household consumption was particularly weak, investment slowed down a bit but we did see a strong contribution to the economy from net exports, as coal and iron ore exports ramped up," HSBC Australia chief economist Paul Bloxham said after the figures were released on Wednesday.
The quarter was a difficult time for the global economy, which saw lower commodity prices thanks to slower growth in China, ongoing weakness in Europe and uncertainty in the US as Congress struggled to reach an agreement to avoid automatic tax hikes and spending cuts.
The ABS figures show net exports added 0.6 percentage points to GDP growth over the quarter.
However that was partly offset by slower growth in inventories - as stockpiles of minerals mined in previous quarters were run down.
The figures also showed a sharp rise in public sector investment, which is understood to be due to the multi-billion dollar Wonthaggi desalination plant being handed over to the Victorian government.
But the effect of the rise on GDP was offset by a corresponding drop in private sector investment as the asset was transferred to the public sector.
Mr Bloxham said economic growth was likely to improve in 2013, meaning the Reserve Bank of Australia was unlikely to cut the cash rate below its current level of three per cent.
"We think the soft patch these figures represent is behind us and that growth will pick up in the first half of this year, so we think the RBA's easing phase is done," he said.
The RBA cut the cash rate 1.75 percentage points between November 2011 and December 2012.
CommSec chief economist Craig James expected the economy to grow by more than three per cent, which meant the RBA had little reason to cut again.
He said despite the relatively soft December quarter, the Australian economy remained in good shape.
"Australia has a Goldilocks economy - not too hot, not too cold, in fact just about right," he said.
"Inflation is under control, unemployment is low, the economy is growing at a 'normal' pace and our government deficit and debt levels are low compared with other advanced nations."
Australian Treasurer Wayne Swan said the Australian economy outperformed most of the developed world during the December quarter.
"Australia has managed to achieve solid growth in the December quarter at a time when around half of all advanced economies contracted, including five major advanced economies," Mr Swan said.