Australian economy solid in second quarter

 
City A.M. Reporter
Australia's economy enjoyed solid growth last quarter to again outpace its peers, but there was little time to celebrate as tumbling export prices and a slowdown in China argued for a cut in interest rates now to safeguard growth in the future.

Government data today showed GDP rose 0.6 per cent in the second quarter, moderating from the previous quarter when it jumped an exceptional 1.4 per cent.

That left GDP up a brisk 3.7 per cent compared to the second quarter of 2011, with domestic demand showing a particularly strong rise of 5.9 per cent.

But while the economy had momentum then, the future looks more difficult as falling prices for key exports such as iron ore drain incomes and cool the red-hot mining sector.

"The second half is going to be much more challenging," said Stephen Walters, chief economist at JPMorgan. "You're not going to get the same sort of growth rate we have had."

The Reserve Bank of Australia yesterday left interest rates steady at 3.5 per cent but highlighted that the recent sharp price falls in resource exports and admitted to uncertainty about the outlook for China, Australia's biggest customer.