"And these kinds of numbers underline that point," he said. "It certainly shows the economy had a decent amount of momentum in the run-up to the latest round of European woes and that's a handy position to be in." At an annual rate, the economy surged 4.3 per cent - easily topping the 3.3 per cent pace analysts had been expecting. The rate also compared with a revised 2.5 per cent expansion for 2011, according to the Australian Bureau of Statistics. The surprisingly strong gross domestic figures - the best since the September quarter of 2007 - were revealed just a day after the Reserve Bank opted to cut its key cash rate by another 25 basis point in a bid to shield the economy from the fall-out of slowing global growth. While the March expansion figures underscore the momentum the economy had after the start of the year, they also precede the latest burst of concerns about the European debt crisis. In recent weeks, too, growth has also eased in the US and China, the latter being Australia's biggest export market. Capital expenditure hot spots Western Australian and the Northern Territory experienced the highest growth in state final demand rising 14 per cent and 15 per cent respectively on the national full year growth average of 5 per cent.

The dollar rallied on the news, jumping more than half a US cent to as high as 98.6 US cents before easing back in 98.5 US cents recent trading. Stocks reversed morning losses to end the day up 0.3 per cent, adding to yesterday's 1.5 per cent surge. Investment, consumer gains As expected, investment - much of it mining - helped power the economy's growth spurt. So-called private gross fixed capital formation alone contributed 0.8 percentage points to the quarterly growth pace of 1.3 per cent. I’m picking my jaw off the table.

Business investment rose 5.5 per cent in the quarter to a new high, and was 20 per cent more a year earlier. Engineering construction was a full 50 per cent higher on the year, with some $500 billion in the investment pipeline. The biggest surprise, though, was the contribution to growth from household spending, said St George Bank economist Janu Chan. The sector added 0.9 percentage points to the quarterly expansion, rising 1.6 per cent in the quarter and 4.2 per cent for the year. "The other area [of surprise] was incomes," Ms Chan said. "Strong wages offset weak company profits." Incomes rose 2.5 per cent in the quarter, contributing 1.2 percentage points to the GDP growth. Drags on the economy included so-called net exports, which trimmed quarterly growth by half a percentage point as export growth wilted.

Total investment in dwellings also fell 2.1 per cent in the quarter to be down 6.2 per cent in the year to March, as the property market continued to struggle in much of the country. 'Extraordinary picture' Treasurer Wayne Swan said the National Accounts painted an "extraordinary picture of exceptional growth" in the March quarter. "[They] showcase the rock-solid economic fundamentals which put our economy in a league of its own, despite ongoing global turbulence," Mr Swan said in a statement. Mr Swan labelled the 1.3 per cent rise in GDP as "stunning".

"This is a remarkable outcome and reaffirms Australia's position as one of the strongest economies in the world, with the Australian economy growing faster than every single major advanced economy in the March quarter," he said. "In through-the-year terms, this result is the fastest growth in over four years, which have been the most turbulent in the global economy since the Great Depression of the 1930s." Australia's annual growth pace of 4.3 per cent compares with 3 per cent in the US, zero growth in the eurozone, a 0.1 per cent contraction in Britain and 2.7 per cent in Japan. China's growth was 8.1 per cent and India's 5.3 per cent. Deflation concern Some economists, such as Stephen Koukoulas, spotted one surprise in the data that was less positive.

The terms of trade - a gauge of export prices against import ones - fell 4.3 per cent in the quarter as commodity prices plunged from peaks. The result was that GDP adjusted for inflation was actually less than so-called nominal GDP. Mr Koukoulas tweeted that the last time such an inversion happened was "when Jesus played halfback for Jerusalem". Similarly, some economists, such as JP Morgan economist Stephen Walters, cautioned that the rekindled European debt crisis in May and signs that growth in China and the US was faltering would produce a less impressive growth result in the current quarter and beyond. "The March quarter GDP result is very likely to be the high-water mark for growth in the Aussie economy, with more cautious households, further declines in dwelling activity, and much bleaker offshore conditions, which will be an ongoing drag on export volumes," Mr Walters said. "Also, despite the upbeat headline outcome, the picture painted today still is one of an economy not quite firing on all cylinders."

Output from the miners rose 2.3 per cent in the quarter, while manufacturing output dropped 0.8 per cent in the March quarter, he noted. Rates outlook Fellow JP Morgan economist Ben Jarman said the strong March quarter numbers mean the RBA is now likely to wait until August for the next interest rate cut. "Today's numbers show that the underlying momentum is OK, and you don't need to panic and keep pushing through rate cuts every month because you're worrying about the domestic economy." HSBC economist Paul Bloxham also expects another RBA rate cut in August, with inflation low enough to give the central bank scope to lower rates.

RBC Capital Markets senior economist Su-Lin Ong, though, said the faster expansion in the early part of the year may have been spurred by RBA's rate cuts in November and December. A July rate cut is still possible, she said. "You can't rule out a July rate cut entirely but this number falls on the side of the ledger of maybe just waiting and seeing the impact of the fairly substantial moves in May and June," Ms Ong said. The central bank followed up its super-sized 50 basis-point cut in May with another 25 basis-point reduction yesterday. Interest rate futures, one gauge of expectation about the next rate move, are still rating a July cut as likely. Loading

Still, the chance that such a move will be 50 basis points has basically halved to be a one-in-four prospect, according to Credit Suisse, an investment bank. With Judith Ireland, and AAP

