Australia GDP Growth Tops Expectations

(RTTNews) - Australia's economy logged a stronger-than-expected growth in the second quarter, raising prospects of interest rate hike by the Reserve Bank of Australia.

Gross domestic product grew 2.1 percent from the previous year, the Australian Bureau of Statistics said Wednesday. This was slower than first quarter's 2.5 percent expansion but better than forecast of 1.8 percent.

On a quarterly basis, GDP growth improved marginally to 0.4 percent from 0.3 percent in the prior quarter. The growth was driven by private demand and mining exports. "Economic growth remained subdued in the June quarter as households continued to behave cautiously," ABS head of National Accounts Grace Kim said.

"While increased spending and business investment occurred in pockets of the economy, imports supported much of the growth, moderating its contribution to overall GDP growth," Kim added.

Household spending grew only 0.4 percent in the second quarter as higher fuel prices due the Middle East conflict reduced fuel consumption, and also travel.

At the same time, purchase of vehicles advanced 10.3 percent as households continued to transition to electric vehicles.

Private business investment declined 0.5 percent, data showed.

Exports rose 0.8 percent driven by coal reflecting higher production, following weather disruptions in the March quarter. The increase in exports outpaced the rise in imports, which climbed 0.5 percent. As a result, net trade contributed 0.1 percentage points to GDP growth.

Last month, the RBA had left its key interest rate at 4.35 percent but hinted at tightening if upside risks to inflation materialize. The bank had lifted the policy rate by 25 basis points each in February, March and May.

The next monetary policy announcement is due on September 29.