Despite a slowdown in China, a prolific trade partner with Australia, GDP from the latter country grew by at a significant 2.50% annualized pace according to third-quarter results. The surprising quarterly figure for the economy’s growth was 0.90%, far above second-quarter results of 0.30% growth according to the Australian Bureau of Statistics. Though China, a major consumer of Aussie commodity exports is in an economic squeeze, the Australian mining sector experienced unexpected growth of 5.20% during the quarter. The mining sector has a strong correlation with net exports, which is attributed to about 1.50% of total GDP and likely a major part of the impetus behind this recent headline figure. Exports themselves ballooned by 4.60% quarterly, setting a rapid pace of growth not seen in almost 15 years. The yearly GDP result is particularly impressive given the annualized statistic last quarter, a meager 1.90%. These latest results are by and large the most remarkable in comparison to other G7 countries, with Aussie officials lauding economic acceleration that is double that of Canada’s.
Besides mining growth, increasing expenditures from households has also likely driven the most recent positive report. Increases in borrowing power, stemming from gradually implemented dovish monetary policies has kept momentum behind purchases strong. Economists in Australia cannot rely on developments like these to keep the trend facing the right direction, however, with Chinese and domestic concerns still lingering in abundance. Issues that have proven longstanding include weak inflation, which continues to weigh on outlook, and a drop in capital expenditures with energy prices along for the ride. These stubborn problems have resisted many attempts at resolution through monetary policy intervention the world over, and the fact that they are not improving means expansion or prolonged easing may be around the corner. However, the positive report and rapid growth in mining mean hesitant optimism from Australian officials, with bankers including RBA Governor Glenn Stevens noting that a beginning to a long-term recovery could be in the pipeline.