- David de Garis, National Australia Bank senior economist
Australia's economy lost momentum in the second quarter after a dramatic decline exports, but the pace of growth was still above expectations. The Australian GDP rose a mere 0.5% in the June quarter, beating forecasts for a 0.4% expansion, and following the 1.1% gain in the beginning of the year. On an annual basis, GDP increased 3.1% after advancing 2.9% in the previous three-month period. The net exports appeared to be the main drag on the nation's economy, as they contracted 0.8% on quarter, whereas imports climbed 3.1%. Australia's key commodity exports, particularly iron ore, have also been impacted by a sharp fall in prices this year. Private consumption growth increased slightly and while business investment growth strengthened, whereas investment in new dwellings expanded at a slower rate.
The slowing economy comes in line with forecasts of the Reserve Bank of Australia, who on Tuesday kept interest rates on hold at a historic low of 2.5% for a 13th consecutive month, and reiterated the need to maintain the accommodative monetary policy for the foreseeable future as the country moves away from a mining investment boom that has helped the economy avoid recession for more than two decades. The central bank Governor, Glenn Stevens, said he expects economic growth to be a little below trend over the year ahead, despite continued low interest rates.
© Dukascopy Bank SA