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Australia GDP grows 0.2% as expected in Q4

Published 03/05/2024, 07:40 PM

Investing.com-- Australia’s economy grew as expected in the fourth quarter, aided chiefly by strong government and business spending and steady exports, which helped offset a broader decline in consumption. 

Gross domestic product rose 0.2% quarter-on-quarter in the three months to December 31, data from the Australian Bureau of Statistics showed on Wednesday. The reading was in line with expectations and remained steady from the prior quarter. 

Year-on-year GDP grew 1.5%, higher than expectations of 1.4% but slower than the 2.1% growth seen in the prior quarter. 

Increased government spending was a key driver of the GDP reading, as Canberra spent more on household benefits and government employee salaries. Defense spending fell during the quarter. 

A recovery in exports aided the Australian economy, with net exports contributing more than expected for the fourth quarter. Sustained stimulus measures in top export destination China kept metal exports to the country steady, while Asian and European demand for heating fuels during the winter season also factored into higher exports. 

On the other hand, sluggish consumer spending and a persistently weak housing market weighed on the economy through the fourth quarter, especially as household savings dwindled over the past year. A cooling labor market is also expected to increase pressure on household finances.

Wednesday’s reading indicated that the Australian economy remained on the backfoot amid high interest rates and somewhat sticky inflation. 

The Reserve Bank of Australia had also recently warned that economic growth will remain below trend in the coming years, especially as rates remain higher for longer. 

Still, steady expansion in the Australian economy still gives the RBA more headroom to keep interest rates higher for longer, especially in the face of sticky inflation. 

The central bank had warned earlier this year that it could still hike interest rates further.

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