Australia's economy grew twice as fast as economists forecast in the first quarter, driving the nation's currency higher on speculation the central bank may raise interest rates for a third time this year.
Gross domestic product rose 0.6 percent from the fourth quarter, when it increased a revised 0.7 percent, the Bureau of Statistics said in Sydney yesterday. The median estimate of 24 economists surveyed by Bloomberg News was for a 0.3 percent gain.
Household and government spending, as well as a jump in construction, is helping buttress the economy's 17-year expansion and the fastest inflation since 1991. Central bank Governor Glenn Stevens left the benchmark interest rate at 7.25 percent yesterday and signaled he was prepared to raise borrowing costs again if economic growth doesn't slow.
"This is a green light for another interest-rate increase this year," said Savanth Sebastian, an equities economist at Commonwealth Bank of Australia in Sydney. "The record expansion continues despite the Reserve Bank of Australia's efforts to significantly slow the economy."
The Australian dollar jumped to 95.54 US cents at 1:19 pm in Sydney from 94.92 cents before the report was released. The yield on the two-year government bond climbed 12 basis points, or 0.12 percentage point, to 6.88 percent.
Traders see a 100 percent chance the Reserve Bank will raise interest rates by a quarter point by year end compared with 62 percent odds on Tuesday, 30-day interbank interest-rate futures contracts show.
Household spending contributed 0.4 percentage points to quarterly growth, yesterday's report showed. Construction and national defense spending added 0.3 percentage points each.
Yesterday's report suggests Australian consumers and businesses have weathered higher borrowing costs, record gasoline prices and a slump on the nation's stock market this year.
Source: China Daily/Agencies
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