SYDNEY – Australia’s economy grew solidly in the first quarter, ignoring interruptions related to omicrons and east coast flooding earlier this year, with charged consumers continuing to push for expansion.
The economy grew 0.8% in the first quarter from the previous quarter and 3.3% from the previous year, the Australian Bureau of Statistics said on Wednesday. Economists had forecast GDP growth of 0.6% for the quarter and 3.0% for the year.
Australia, a major exporter of iron ore and energy products, is benefiting from rising commodity prices as a result of the conflict in Ukraine. However, China’s zero tolerance for COVID-19 cases is a strong headwind, with more than a third of Australia’s exports to ports on China’s east coast.
Australia’s high demand for rural and mining commodities amid supply constraints from other producing countries and global uncertainty contributed to rising export prices. Mining profits rose 14.7% to A $ 69 billion ($ 49.52 billion), reflecting high prices for coal, liquefied natural gas and iron ore raw materials. say the statistics office.
However, Australia’s domestic outlook looks more complicated as rising inflation has caused the Reserve Bank of Australia to raise rates rapidly. The RBA offered its first interest rate hike in more than a decade in May, acknowledging that it had underestimated the strength of price increases across the economy.
Inflation rose at its fastest pace in more than 20 years in the first quarter, and economists expected worse in the coming quarters.
House prices have already begun to fall amid concerns that the central bank needs to be more aggressive in raising interest rates than most economists expect. Some economists are tilting 15% falls over the next cycle, which reduces confidence.
Financial markets expect the RBA to offer multiple rate hikes by the end of the year, and more to come in 2023.
The incoming Labor government, which returned to power on May 21 after nine years in opposition, is also facing the task of a massive budget overhaul after a generous stimulus was deployed to keep the economy afloat. growing for two years of COVID-19 closures.
Consumer confidence is already waning as the prospect of rising interest rates, rising cost of living and falling real wages combine to cool spending.
Australia’s terms of trade rose 5.9% in the first quarter, with a sharp rise in export and import prices, the statistics office said.
Household and government spending boosted growth, and total final consumption contributed 1.4 percentage points to GDP in the first quarter. Household spending rose 1.5% with increases in various discretionary categories, the ABS said.
Following the easing of COVID-19 restrictions, household spending on transportation services, hotels, cafes and restaurants, and recreation and culture increased, ABS said.
The household income savings ratio fell to 11.4% from 13.4%, as the increase in household spending outpaced the growth of household income, he added. .
Imports of goods and services increased by 8.1%, and net exports fell by 1.5 percentage points of GDP.