Australia economy finds spark of life in consumer spending

Tue Mar 3, 2015 9:15pm EST
 
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By Wayne Cole

SYDNEY (Reuters) - Australia's economy grew moderately last quarter as a strong trade performance and the largest rise in consumer spending in almost three years helped offset softness elsewhere.

Wednesday's data showed gross domestic product (GDP) expanded by 0.5 percent in the fourth quarter, compared to the previous quarter when it rose by 0.4 percent.

"The good news is we've now completed 23 years of continuous growth," said Michael Blythe, chief economist at Commonwealth Bank. "The bad news is we're still running below trend, which will keep upward pressure on the unemployment rate and the RBA (Reserve Bank of Australia) on rate-cut watch."

The result matched market forecasts, which was a relief to many analysts who had feared the risks were for a weaker outcome and lifted the local dollar a quarter of a cent AUD=D4.

The economy grew 2.5 percent for all of 2014, a result that actually topped the United States but remained well short of the 3.25 percent that is considered its ideal running pace.

After trimming interest rates to a record low of 2.25 percent in February, the RBA skipped a further move this week but left the door wide open for an easing in coming months.

Interbank futures <0#YIB:> imply a better than 50 percent chance of a cut in April and are fully priced for a move in May.

There were some hopeful signs that low rates were feeding through to consumption with household spending adding 0.5 percentage points to GDP in the fourth quarter, the best outcome since early 2012.   Continued...

 
A Westralian Engineering Services worker uses a grinder in one of the company's workshops near Perth October 20, 2011. REUTERS/Ron D'Raine