Australia grows at fastest rate since 2008 crisis

AP News
Posted: Jun 06, 2012 4:25 AM
Australia grows at fastest rate since 2008 crisis

Australia's economy rocketed to 4.3 percent growth for the year through March, its fastest expansion since the global financial crisis as Chinese demand for iron ore and other commodities masked difficulties outside the mining industry.

The Australian Bureau of Statistics said Wednesday that the economy grew 1.3 percent in the January-March quarter from the previous quarter, which was double what economists had expected.

A major driver was a 19.7 percent surge in engineering construction, mainly in mining. Planned investment in the resources sector reached 500 billion Australian dollars ($500 billion).

Increased spending by households also made a significant contribution to growth. But manufacturing continued to contract as the mining boom drives up the Australian dollar, making the country's manufactured exports less competitive.

The January-March growth figures predate the latest deterioration in the Europeans debt crisis but could still make Australia's central bank less willing to cut interest rates aggressively. The central bank on Tuesday cut its benchmark rate for a second consecutive month, to 3.5 percent, as Europe's economy weakens and growth in China moderates.

Treasurer Wayne Swan said the strong growth was achieved despite a cyclone disrupting iron ore exports from Western Australia state and some sectors outside the mining industry struggling against a high Australian dollar.

Mineral-rich Western Australia's economy grew by 13.6 percent for the year.

"There have been headwinds as well, which is also why this is such a remarkable result," Swan told reporters.

Swan said the growth also demonstrated that the AU$1.5 trillion Australian economy would withstand a carbon tax which will be paid by the nation's biggest industrial polluters from next month.

The government's critics argue that the AU$23 tax that polluters will have to pay for every metric ton of carbon gases that they produce would cost jobs.

"The fact is with a carbon price, our economy will continue to grow," Swan said.

The government forecast in May that the mining boom would lift economic growth from 3 percent in the current fiscal year ending June 30 to 3.25 percent next year.

It also forecast that the carbon tax which will take effect from July 1 would dampen economic and employment growth by less than a quarter of a percentage point during the next fiscal year.