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Australian Economic Growth Surpasses Predictions
Source: abc.net.au
Source Date: Wednesday, September 01, 2010
Focus: Electronic and Mobile Government, Internet Governance
Country: Australia
Created: Sep 05, 2010

Australia's economic growth has hit a three-year high with signs the economy is now less dependent on the government's fiscal stimulus.

The Bureau of Statistics' National Accounts show growth from the March to the June quarter accelerated by more than expected, to 1.2 per cent in the second quarter, with annual growth at 3.3 per cent.

Consumer spending was surprisingly high, while housing construction and infrastructure investment also picked up.

Australian Treasurer, Wayne Swan says they are an outsanding set of figures.

"Strong growth and a strong outlook in a confident Australia. And I can say from my G20 involvement that finance ministers elsewhere and prime ministers elsewhere would kill for a set of outcomes such as these."

"They are very important for Australia because what they show is that the plan the government put in place when the global recession hit and the global financial crisis came along has worked."

With growth at 1.2 per cent, it's Australia's best quarter for three years, confirming the economy is running on its own steam.

Exports, mainly mineral exports to Asia, also contributed significantly to figures, as iron ore and coal prices surged.

China's growth has slowed a little but it's not a sharp downturn - it's settled back to a more sustainable 10.3 per cent growth in the second quarter from 12 per cent in the first.

Domestic demand in India has it set for a return to close to pre-crisis growth levels of more than 8 per cent.

Korea is another big customer for Australian commodities and is showing a strong recovery with a forecast of almost 6 per cent growth this year - a massive turnaround from last year's 0.2 per cent.

Sue Lin Ong, senior economist with RBC Capital Markets, says Australia is fortunate to be leveraged to the strongly growing Asian region.

"Export volumes put in a very good performance. We had a very strong 5.5 per cent increase in export volumes," she said.

"So, Australia is very much benefiting from being part of this region and strength in the region and we think that is the story, not just for this quarter and next year, but really for decades to come."

But a threatening cloud still looms over Europe and the US. Demand for China's clothes and gadgets is likely to weaken in these markets.

Sue Lin Ong says in Australia's case there were surprisingly strong data for consumption and construction.

"We actually think there's a reasonable amount of resilience and unexpected strength in the data. So, consumption in the quarter - it was up 1.6 per cent. That's a pretty big monthly gain."

But if the fears of a double dip recession in the US prove correct Asia will feel the effects.

"In particular, the US, where the data run in the last couple of weeks to months has proved very disappointing. The US does look like it's losing some momentum," said Sue Lin Ong.

"Markets are fairly wary ahead of key numbers later this week...so it is a concern and while Australia's trade exposure to the US is nowhere near as significant as it is to Asia, if the US is losing some momentum and there is a risk of a double dip, then Australia will feel some impact from that."

There is a gloomy side to the strong recovery underway in Asia.
Very high housing prices led Singapore on Monday to join China in imposing tough restrictions on real estate speculation.

Authorities are increasingly concerned about a property bubble about to burst in these two countries, as well as Hong Kong.

In Australia, there are far fewer policy options to improve fast receding housing affordability.
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