SYDNEY, Sept 7 —Australia’s resource-rich economy grew surprisingly strongly last quarter as households spent more than expected and miners rebuilt stocks, recovering well from the previous quarter’s flood-driven fall.
Gross domestic product (GDP) rose 1.2 per cent in the second quarter, topping forecasts of a 0.9 per cent rise and more than recouping the first quarter’s 0.9 per cent decline. Growth for the year was 1.4 per cent, again well above forecasts.
The Australian dollar jumped a third of a cent on the news while the futures market further pared the chances of a cut in interest rates anytime soon.
Indeed, the data reinforced the optimistic outlook on the economy from Reserve Bank of Australia (RBA) Governor Glenn Stevens, who indicated it was best for policy to stay steady during times of global uncertainty.
“Basically this validates the RBA’s view that the Australian economy’s entered into the current period of global turmoil in pretty good shape,” said Katie Dean, head of Australian economics at ANZ.
“We actually think the RBA’s probably going to stay on its hands for a fairly extended period,” she added. “Whilst the economy is going very well at the moment, it does still face some challenging times over at least the next six months.”
The RBA held its September meeting yesterday and kept rates unchanged at 4.75 per cent for a tenth month.
Markets have been betting that the concerns over global growth would push the central bank into easing policy, in part because it is one of the few developed nations that has room to actually cut rates.
Interbank futures still imply around 68 basis points of cuts by Christmas, but that has come back from a peak of over 160 basis points last month.
In a speech in Perth, the RBA’s Stevens emphasised that it was far too early to say how the turmoil in markets might affect global growth or policy at home.
“Periods of sudden increases in anxiety within international financial markets are moments when, if at all possible, it is good to be in a position to be able to maintain steady settings,” Stevens told an industry conference. — Reuters