The Australian economy grew by a healthy 1 per cent for the first quarter, according to the latest figures from the Australian Bureau of Statistics.
This had the economy growing at 3.1 per cent over the 12 months to March, well above the expected level of 2.8 per cent.
First quarter growth was better than the market’s expectations of 0.9 per cent growth.
The growth was driven by strong investment in machinery and equipment. It was particularly strong in the non-mining sector.
Private non-financial business profits increased by 6 per cent in the March quarter, the strongest increase in the past year.
A strong rise in exports accounted for half the growth in gross domestic product (GDP) with production of coal, iron ore and liquefied natural gas increasing strongly.
Household consumption grew by 0.3 per cent driven by rises in people buying non-discretionary items.
It grew 2.9 per cent through the year while the household savings ratio fell to 2.1 per cent, coming in at its lowest rate since December 2007.
However, ANZ senior economist Felicity Emmett said that while the numbers were solid, they were unlikely to persuade the Reserve Bank of Australia to be anything less than cautious. This means interest rates will remain on hold for the time being.
“The RBA is likely to be relieved with the rebound in growth, but cognisant that the outlook is far from assured,” Ms Emmett said.
“While business conditions remain buoyant, the household sector remains under pressure from soft wage growth, a low saving rate and weakening house prices. The risks to the global economy have also increased.
“In this environment, and with inflationary pressures still modest, the RBA is clearly on hold for some time.”