Surging mining exports powered the Australian economy to better-than-expected 1.1 percent growth in the first quarter of the year, data showed yesterday, but Australian Treasurer Joe Hockey said he was also encouraged by a pick-up in other sectors.
The figures will come as welcome news for the government as a decade-long mining boom winds down, but analysts warned recent data point to weakness further down the line.
Annual growth was a seasonally adjusted 3.5 percent, the Australian Bureau of Statistics said, compared with analysts’ expectations of 3.1 percent. Markets watchers had expected growth of 0.8 percent in the three months to March.
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Hockey said while it was clear Australia relied heavily on its mining exports, the expansion in other sectors “show that the expected transition away from mining investment and construction toward other drivers of growth is underway.”
“This is an important indicator that the rest of the economy — the non-mining side of the economy — is starting to lift and that’s encouraging,” he added.
The Australian dollar rose by a third of a US cent to US$92.92 on the back of the figures, which followed a 0.8 percent expansion in the three months to December.
The mining sector made up 80 percent of growth in January to March, as net exports contributed 1.4 percentage points to the final figure. Consumption added 0.3 percentage points, but some of the gains were partially offset by inventories, which subtracted 0.6 percentage points.
Hockey said milder weather at the start of this year played a part in boosting exports.
“It’s an extraordinary quarter in March when you don’t have cyclones, particularly in Western Australia affecting Port Hedland, so our miners are exporting their socks off, and thank God because it’s having a positive impact on our economy,” he said.
However, he cautioned that “one swallow doesn’t make a summer.”
“The fact is that because we didn’t have cyclones in this March quarter, they dug deep into the inventories and as you can see, inventories detracted from the gross national expenditure in this quarter,” Hockey said.
ANZ senior economist Felicity Emmett said while the latest data was “a particularly good result,” it overstated the underlying strength in the economy as more recent data pointed to a slowdown in second-quarter growth.
“That is, retail sales data suggests that household consumption may slow further, while net exports are unlikely to make such a large contribution to growth,” she said. “Moreover, the drag from the wind-back in mining investment is likely to be sharper over coming quarters as large-scale LNG [liquefied natural gas] projects approach completion.”
AMP Capital chief economist Shane Oliver echoed her comments, saying it was “too early to break out the champagne” as he projected growth this quarter of just 0.5 percent.
“Mining export volume growth will slow down after the initial surge from new mine completions, consumer spending is likely to slow on the back of the [last month’s] budget’s short term hit to confidence and the further decline in the iron ore price will weigh on national income,” he said.
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