-Craig James, a senior economist at a unit of Commonwealth Bank of Australia
Upcoming spending cuts and new taxes, a possible boom in the housing market and waning investment in the key mining sector– all that was constantly adding more pressure on the RBA to reconsider its monetary policy. This week's GDP report, however, provided a relief for policymakers, as economy expanded at the fastest pace in two years on the back of surging exports.
On Wednesday Australian Bureau of Statistics claimed that the nation's gross domestic product expanded 1.1% in the three months to March, accelerating from previous quarter's growth of 0.8% and beating analyst' estimations for a 0.9% growth. That puts annualized growth at 3.5%. The main contributor to growth was the trade sector, as net exports contributed 1.4%, while final consumption expenditure added 0.3% and private gross fixed capital formation contributed additional 0.2%. In contrast, inventories took some 0.6% from the indicator.
The data means the economy is in a better shape than it was predicted earlier and, perhaps, it will manage to withstand government spending cuts and a decline in resources projects, which the RBA has flagged as a headwind for prosperity. The mining sector accounts for about 80% of growth in the March quarter of this year, meaning that further decline in investment can be vital for the Australian economy.
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