GDP boom for Oz as consumer spending rises

THE AUSTRALIAN economy expanded more strongly than expected in the first quarter, booming at its fastest pace in more than four years.

GDP rose 1.3 per cent in the first three months of 2012 – more than double the 0.5 per cent that had been forecast.

That growth spurt followed a downwardly revised 0.6 per cent expansion in the final quarter of 2011, and means the economy is now 4.3 per cent larger than a year ago.

Domestic demand rebounded sharply, contributing 1.8 percentage points to growth, up from 0.2 in the previous quarter. That was made up of household spending, which added 0.9 percentage points up from 0.2 previously, and private investment which added 0.8 percentage points.

In the same quarter the Eurozone recorded no GDP growth and the UK saw output contract by 0.3 per cent.

“The report is much stronger than expected and shows that, including revisions, growth was not as far below trend as perhaps the Reserve Bank of Australia had thought,” said Nomura economist Martin Whetton.

“While the rise in private investment was expected, the strength in household spending was surprising, partly driven by a strong increase in expenditure on food.”