This article is more than 2 years old

This article is more than 2 years old

Australia’s economy is growing at an annual rate of 3.1%, up from 2.4% three months ago, largely thanks to mining commodities exports.

It is a significant increase in the rate of growth, in seasonally adjusted terms, and marks a strong start to 2018.

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Bureau of Statistics figures show the quickening pace of growth in the March quarter was mostly driven by exports of mining commodities. Export growth accounts for half the increase in gross domestic product (GDP), while government spending accounts for roughly a third.

The bureau said: “Production of coal, iron ore and liquefied natural gas showed strong increases.”

Economists are not surprised by the increase in the growth rate. They say the result brings output growth more into line with jobs growth, which was an unsustainably-high 3.5% last year.

“This is against the backdrop of stronger global growth, which accelerated in 2017 to the fastest pace since 2011,” Westpac economist Andrew Hanlan said.

In the last four quarters, the economy has grown by 1.01% (March quarter), 0.54% (December quarter, 2017), 0.52% (September quarter, 2017), and 1.03% (June quarter, 2017), bringing the annual growth rate to 3.1%.

The treasurer, Scott Morrison, says the growth rate jumping above the long-run average again has validated the forecasts and economic outlook in his budget.



“In the budget this year I said everything we endeavour to do depends on a strong economy,” he said. “Today’s national accounts show the Turnbull government’s plan for a stronger economy is working, and we need to stick to that plan.”

Economists say the strong lift in net exports over the last three months is unlikely to be repeated.

Data shows exports of goods were up 2.9%, driven by non-rural exports, with mining commodities, liquified natural gas, coal, iron ore and non-monetary gold the main drivers, which helped net exports rebound from their poor showing in the December quarter.

“We doubt that the strength of net exports will be sustained as some of it was due to a catch-up after production problems in the middle of last year,” Paul Dales, the chief economist of Capital Economics, said.



Another strong contributor to growth was total government final consumption expenditure.

It rose 1.6% in the March quarter, and 5.1% over the last 12 months, due to continued spending on health, aged care, and disability services, thanks to the National Disability Insurance Scheme.

Household consumption was quite weak in the March quarter, growing by just 0.3% in the quarter. The household savings ratio also fell again, to just 2.1% - the lowest rate since December 2007. The savings ratio has declined over the past decade but the rate of decline has moderated in the past four quarters.

The weak consumer spending shows households are still struggling with anaemic wages growth, with economists predicting consumer spending will remain weak for the rest of the year.

“The significant headwinds faced by the household sector - weak wage growth, cooling house prices and high debt levels – continue, and are likely to weigh on consumption in 2018,” NAB senior economist Gareth Spence said.