Australia's economy expands, defying global recession

Wednesday 3rd June 2009

Australia’s economy rose more than expected in the first quarter, defying a global recession, on robust agricultural exports, fiscal and monetary stimulus. The Australian dollar jumped to an eight-month high.

Gross domestic product grew 0.4% in the three months ended March 31, from a revised 0.6% contraction in the fourth quarter of 2008, according to the Australian Bureau of Statistics said in Sydney today. Growth of 0.2% was expected, according to a Reuters survey.

The Australian economy expanded in the face of the first simultaneous recession in the world’s biggest economies since WWII, helped by more than A$12 billion of fiscal handouts and a central bank that slashed its benchmark interest rate at a multi-decade low 3%.

The Australian dollar jumped to 82.46 US cents, the highest since September last year. The New Zealand dollar tumbled to 79.21 Australian cents from 79.86 cents before the figures were released.

“The enormous fiscal and monetary policy stimulus will ensure that public demand and a housing construction recovery will boost conditions during the second half of 2009 and into 2010,” economists at Westpac said. Still, the jobless rate will likely keep climbing, with economic conditions remaining mixed in the near term, they said.

The unemployment rate reached 5.4% in April from 3.9% two months earlier.

Treasurer Wayne Swan said Australia’s economy still faces tough times.

“The Australian economy is not out of the woods yet and the full impacts of this global recession still have some way to run,” Swan said.

The GDP report showed exports rose 2.7%, government spending climbed 0.3% and consumer spending rose 0.6% last quarter.

“Exports, supported by a rebound in farm output over the second half of 2008, increased by 2.7% in Q1,” Westpac said. “That resilience, at a time of sharply lower imports, saw net exports add a staggering 2.2ppts to Q1 growth.”

Business investment fell 6.1%, underlining the pressure facing companies to cut costs as earnings growth wanes.

Businesswire.co.nz

Comments from our readers

No comments yet