Australia economy marks 22 years of growth in Q2

Tue Sep 3, 2013 11:12pm EDT
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By Wayne Cole

SYDNEY (Reuters) - Australia's economy grew moderately last quarter as modest gains in consumer and government spending offset a very flat performance elsewhere, though there was still scant sign of a much-needed recovery in business investment.

The Australian Bureau of Statistics reported gross domestic product (GDP) rose 0.6 percent in the second quarter, from the previous quarter when it rose 0.5 percent. That was enough to send the local dollar higher as there had been fears the report would be much weaker.

The result marked 22 years since the country last suffered a recession, but still underwhelmed. Crucially, there are few signs as yet that business and consumer spending is ready to take over from mining investment as a growth engine.

"Overall it tells us that the economy is continuing to grow but at a very subdued rate, and it's not strong enough to push employment or inflation up," said Shane Oliver, chief economist at AMP Capital Investors.

"We're still far from the collapse that many had feared, but we're still looking for a replacement for mining investment as a driver for growth."

The Reserve Bank of Australia (RBA) has been doing its part by cutting cut interest rates to a record low of 2.5 percent last month. Many analysts think it will likely have to ease again in coming months. <AU/INT>

Financial markets, on the other hand, have pared back expectations for any more easing, in part because of brighter signs in the global economy and especially China.

The Asian giant takes fully a third of Australia's exports and influences the price for many of its commodities, so a stabilization of demand there is a promising omen.   Continued...

The Central Business District is seen from the air on a sunny winter afternoon in Sydney August 24, 2013. REUTERS/Daniel Munoz