Australian 4.1% growth beats expectations


Australia's economy grew a better than expected 4.1 percent in 2001

CNN's Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- Australia's economy has continued its strong consumer-led run, with latest figures showing better than expected growth of 4.1 percent in 2001.

That made it the best performing advanced economy in the Asia-Pacific region last year, exceeded only by the developing economies of China (7.3 percent) and Vietnam (6.8 percent).

National accounts released Thursday by the Australian Bureau of Statistics show the Australian economy grew by a seasonally adjusted 1.3 percent in the December 2001 quarter over the September quarter.

That suggests the economy is continuing to move ahead at a fast pace.

The bureau said the rise in gross domestic product was driven by growth in household consumption, private capital spending and inventory changes.

Stephen Halmarick, co-head of economic and market research with Salomon Smith Barney in Sydney, told CNN Thursday that the GDP statistics represented "very strong numbers fuelled by the consumption sector".

Strong across the board

Halmarick said that while growth was led by consumers, the economy was "strong across the board".

Australia's performance has been helped by a competitive currency, historically low interest rates, a housing boom fuelled by a government subsidy, and strong international demand for some key commodity exports.

But there is a widespread expectation that growth may ease in 2002, as the era of low interest rates comes to an end and the housing and construction boom cools.

Economists caution that continued growth is dependent, too, on a recovery in the global economy, particularly the United States.

The central Reserve Bank of Australia left the benchmark overnight cash rate unchanged at 4.25 percent after its monthly board meeting on Tuesday, with most analysts expecting the next move to be up.

Halmarick told CNN that he expected the central bank to start lifting rates in the third quarter of this year, probably in August or September.

He said rates would likely hit 5 percent by the end of the year and 5.5 percent in 2003.

The Australian dollar, which now trades at 52 U.S. cents, should reach 55-56 cents later this year, according to Halmarick.

The latest Asia-Pacific economic outlook by analyst IMA Asia, released Wednesday, forecasts growth of 3.0 percent this year for Australia. That is among the more conservative estimates, with some economists predicting growth could go as high as 4 percent.