Australia GDP growth beats forecast, back to pre-pandemic time

FILE PHOTO: People cross a busy street under holiday decorations in the city center of Sydney, Australia, December 17, 2020. REUTERS

SYDNEY — Australia’s economy extended its rapid recovery in the first quarter as consumers and businesses spent with abandon, lifting output back above where it was last year when pandemic lockdowns tipped the country into recession.

The economy expanded by a real 1.8% in the three months to December, data from the Australian Bureau of Statistics (ABS) showed. Economists in a Reuters poll had forecast a 1.5% rise following an upwardly revised 3.2% gain in the fourth quarter.

The solid back-to-back quarterly growth helped annual output climb 1.1% to A$525.7 billion ($408.05 billion), a major turnaround from last year’s recession low of $468.3 billion.

The first-quarter expansion was driven by private investment which contributed 0.9 percentage points to growth with machinery and equipment investment clocking its strongest quarterly rise since December 2009.

A surge in dwelling activity also helped while household spending added 0.7 percentage points to growth.

Consumers are expected to continue to drive growth with data on credit and debit card spending by major banks as well as official figures on retail sales, employment and building activity all staying strong.

The Reserve Bank of Australia (RBA) slashed interest rates three times last year to a record low of 0.1% and launched an unprecedented quantitative easing program while the government announced a wage subsidy scheme to keep people in jobs. Banks deferred payments on home loans and cut borrowing rates to help boost credit growth.

($1 = 1.2780 Australian dollars)