(Bloomberg) -- Australia’s economy picked up the pace in the final three months of the year, boosted by a revival in household spending, though the outlook remains clouded by persistent inflation at home and mounting trade tensions abroad.
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Government data released Wednesday showed gross domestic product advanced 0.6%, double the pace recorded in the third quarter, while the 1.3% annual expansion exceeded the Reserve Bank’s 1.1% forecast.
On a per person basis, GDP eked out a 0.1% rise following seven consecutive quarters of declines. The increase was driven by weaker population growth, economists said.
“The low point of Australia’s economic cycle has now passed, with some green shoots appearing,” said Stephen Smith, a partner at Deloitte Access Economics. “However, this firming outlook represents the economy kicking into gear rather than firing on all cylinders. Unless more is done to encourage private sector growth and investment, there’s limited upside to the economic turnaround.”
The RBA expects economic growth to further pick up to 2.4% by December this year. It lowered the cash rate for the first time in four years last month to 4.1%, citing growing confidence that inflation was headed back toward the 2-3% target. While monetary policy still remains restrictive, economists anticipate the easing will further support the economy.
Wednesday’s figures, including the lift in per-capita growth, will be welcomed by Australia’s center-left Labor government which is trailing the opposition Liberal-National coalition in polls ahead of an election due by mid-May.
However, the broader economy is still under-performing compared to its 20-year pre-pandemic average of nearly 3%, with government spending largely “keeping the lights on,” said Bob Cunneen, a senior economist at MLC Asset Management.
Government spending climbed 0.7% in the fourth quarter, the data showed.
Measures of productivity remained weak: GDP per hour worked fell for a third straight quarter and non-farm unit labor costs, on an inflation-adjusted basis, remained elevated. The implicit price deflator in the data also signaled a still-strong inflationary impulse.
“This outcome doesn’t materially move the needle on policy for the RBA near term,” said Alex Joiner, chief economist at IFM Investors. “Of more concern to the bank are the unit labor costs, which remain elevated and productivity that recorded another negative quarter.”