Gross domestic product rose 0.6 percent, the biggest gain in more than a year, from the previous three months when it grew 0.4 percent, the Bureau of Statistics said in Sydney.
Today’s report confirms central bank Governor Glenn Stevens’ view that the economy has been stronger than expected” as A$20 billion ($16.6 billion) of government cash handouts boosted spending at retailers such as Woolworths Ltd. and Harvey Norman Holdings Ltd. Australia joins other developed nations, including France and Germany, that are rebounding from the deepest global recession since the Great Depression.
Australia clearly is in a sweet spot, one that we expect to extend through to year end,” said Glenn Maguire, chief Asia- Pacific economist at Societe Generale in Hong Kong. The Reserve Bank will raise interest rates by a quarter-percentage point in November, he added.
Governor Stevens and his board left the overnight cash rate target at a 49-year low of 3 percent yesterday for a fifth month as the economy strengthens. GDP may expand further in coming quarters as the government spends A$22 billion on roads, railways and schools.
Consumer spending jumped 0.8 percent in the second quarter, the largest gain since the three months through December 2007, adding 0.5 percentage points to GDP.
The economy grew 0.6 percent from a year earlier, twice the pace forecast by economists, today’s report showed.
Analysts had cut their growth forecast in the past two days after reports showed a widening current account deficit in the second quarter and a record drop in business inventories.
Today’s report showed engineering construction jumped 5.2 percent in the second quarter. The government last month approved Chevron Corp.’s A$50 billion liquefied natural gas venture, which will leapfrog Australia to second place behind Qatar as the world’s biggest LNG producers.
The Reserve Bank scrapped its forecast last month for the economy to contract this year, instead predicting gross domestic product will expand 0.5 percent. The bank expects growth will accelerate to 2.25 percent in 2010 and 3.75 percent in 2011.
Reports this week showed building approvals rose for a second month in July and manufacturing expanded in August for the first time in 14 months. Consumer and business confidence have also surged to the highest levels in almost two years.
The chain price index, a measure of retail prices, declined 2.2 percent in the second quarter from the previous three months, today’s report showed.