"The headline GDP numbers are going to continue to be flattered by very strong net exports. Which will mean that GDP looks good, but it's not the sort of growth that actually generates any inflation for you ".
-Sally Auld, JP Morgan
Australia's economic growth boomed past expectations in the first quarter with the annual pace speeding to its fastest in three years, a result that could keep the central bank on hold at its policy meeting next week. Gross domestic product grew a seasonally adjusted 1.1% in the three months to the end of March, exceeding market expectations for a 0.8% gain in the first quarter, due to a strong pick-up in resources and services exports. On an annual basis, GDP grew 3.1%, above economists' consensus estimate for 2.8% growth and defying fears that Australia would be hit by slowing growth in China, its biggest trading partner. According to the Australian Bureau of Statistics, the major drivers of growth during the quarter came from exports and household final consumption expenditure, which contributed 1.0 and 0.5 percentage points respectively. Combined with a marginal fall in imports, net exports contribute a whopping 1.1 percentage points to growth during the quarter. These gains were partially offset by weaker public gross fixed capital formation, which shaved 0.4 percentage points from the number.
However, a real net national disposable income, increased by just 0.2% during the quarter after seasonal adjustments, seeing the year-on year decline accelerate to 1.2%. This is seen as a measure of the real standard of living of Australians, and on that measure the economy is not as strong as the real GDP figure would suggest.
© Dukascopy Bank SA