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21 years of growth for Australia

Wednesday, March 06 07:37:21

Australia's economy grew at a moderate pace last quarter as a long-awaited surge in resource exports helped offset softness elsewhere, while recent evidence suggests the growth pulse might have quickened since the start of the year.

Signs are that lower interest rates have started to spur consumption with a revival in retail sales, rising household wealth and improving confidence among consumers and businesses.

The Australian Bureau of Statistics reported gross domestic product (GDP) rose 0.6 percent in the fourth quarter, compared to the previous quarter when it grew an upwardly revised 0.7 percent. That was dead in line with forecasts.

The value of all goods and services produced was 3.1 percent higher than in the fourth quarter of 2011 at an inflation-adjusted A$372 billion ($381 billion).

"Australia has a Goldilocks economy - not too hot, not too cold, in fact just about right," said Craig James, chief economist at CommSec.

"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," he explained. "To top it all off, Australia hasn't experienced a recession in 21 years."

Sensing the better mood, the Reserve Bank of Australia (RBA) skipped a chance to ease further at its March policy meeting this week, saying past cuts were still percolating through the economy. It slashed rates by 125 basis points last year, taking them to a record-matching low of 3 percent.

Markets have reacted by paring back expectations on how far or fast rates might fall from here. Interbank futures still have one more cut priced in, but not until July <0#YIB:>.

Crucially, it is not yet clear how the economy will cope when a seven-year old boom in mining investment finally plateaus in coming months. The RBA is pinning its hopes on a revival in non-mining investment, but so far the jury is out. ( C ) Reuters