- Keiran Davies, Barclays Plc's chief economist
Australia's gross domestic product grew more than expected in the first quarter, as a pick-up in mining export volumes, household spending and retail stock managed to offset sluggish investment. The Australian economy expanded at a robust 0.9% pace in the three months through March, justifying the Reserve Bank of Australia's decision to keep interest rates on hold. The quarterly growth figure compares with 0.5% in the last quarter of 2014. Economists, however, had expected a 0.7% gain. Measured on an annual basis, growth came in at 2.3%, compared with 2.5% in the December quarter. The economy was boosted by a 5% increase in exports in the first quarter even as commodity prices declined. Final consumption expenditure contributed 0.4 percentage points to growth in the first quarter, while net exports added 0.5 percentage points, but gross fixed capital formation took 0.3 percentage points from growth. Mining added 0.3 percentage points to growth, and financial and insurance services contributed 0.2 percentage points.
However, the end of Australia's mining-investment boom is expected to weigh on economic growth in the coming quarters, which is likely to urge policy makers to add stimulus. Earlier this week the RBA decided to keep the official cash rate on hold at 2%, having already cut the rate in February and May, but indicated that they further easing remained on the cards if economic data suggests that more stimulus is needed.
© Dukascopy Bank SA