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Australia is leaning harder on government investment to keep the economy expanding as global headwinds build, indicating that the brisk growth seen in the April-June quarter could be tough to sustain. Seasonally adjusted real gross domestic product rose 3.3% on the year for the quarter, the Australian Bureau of Statistics said Wednesday. This increase is the largest in four years, and shows Australia is growing faster than every G-7 economy, Treasurer Scott Morrison told a news conference, referring to the Group of Seven advanced nations. Australia has avoided a technical recession, defined by two or more straight quarters of GDP decline, for the quarter century since the latter half of 1991. But the country''s situation is less rosy than the headline figure suggests. GDP rose just 0.5% from the January-March quarter, which saw 1% growth. Exports of commodities such as iron ore and coal have climbed 15% over the past year in volume terms. But low resource prices are weighing on the economy overall, and have forced major companies such as BHP Billiton into the red. Unemployment remains stuck at the upper 5% level. The government has largely replaced the private sector as the engine of economic growth, raising doubts about the sustainability of GDP gains. Government final consumption expenditure rose 1.9% on the quarter, contributing 0.3 point to GDP growth. The household figure increased just 0.4% -- the slowest growth in three years, coming after a brisk 0.8% rise for January-March. Gross fixed capital formation was flat quarter on quarter, with a 15.5% climb in public investment in such fields as transportation and infrastructure offsetting a 3.4% drop in private investment. Housing investment climbed at a brisk 1.6%, fueled by low interest rates and a shortage of housing stock. But investment in non-dwelling construction plunged 12.4%. Spending on mineral and petroleum exploration sank 15.1% amid sluggish global resource prices. Morrison has called infrastructure investment a core component of policies promoting job creation and economic growth. Prime Minister Malcolm Turnbull''s government touted a platform including greater outlays on roads, railways and other transportation infrastructure in July''s general election. A total of 3.2 billion Australian dollars ($2.45 billion) is to be budgeted for road work over the next four years -- an 83% increase over the previous four. Work on subways, streetcars and airports is also planned to help alleviate traffic congestion in cities such as Sydney and Melbourne. But Australia could be running low on the policy firepower needed to sustain growth. The Reserve Bank of Australia decided at a Tuesday meeting to keep a key policy interest rate at its lowest-ever level of 1.5%, having already made cuts twice this year. The government''s ability to keep spending is also limited. To maintain healthy growth, the country will need to make larger structural changes, reducing dependence on the resources sector. |
