Australian Economy Grew 0.2% on Government Spending

Dec. 16 (Bloomberg) -- Australia’s economy expanded in the three months through September for a third straight quarter, boosted by government spending on roads, ports and schools.

Gross domestic product gained 0.2 percent from the second quarter, when it rose 0.6 percent, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 17 economists was for a 0.4 percent rise.

Growth in Australia, one of the few economies to skirt the global recession, will accelerate in 2010 as demand rises for exports such as iron ore and Prime Minister Kevin Rudd spends A$22 billion ($20 billion) on infrastructure including schools, the central bank said yesterday. Faster growth adds to pressure on Governor Glenn Stevens to raise borrowing costs in February after this month becoming the only policy maker in the world to increase interest rates three times this year.

“The government’s huge schools program is starting to show up in the numbers,” Kieran Davies, chief economist at RBS Group Australia Ltd. in Sydney, said ahead of today’s report. The central bank “is on track to hike again at its February meeting.”

Consumer spending advanced 0.7 percent in the quarter, adding 0.4 percentage point to GDP, today’s report said. Exports decreased 2.3 percent. Government spending rose 0.7 percent.

The Australian currency fell for a second day, trading at 90.35 U.S. cents as of 11:32 a.m. in Sydney, from 90.67 cents before the release of the GDP report.

Global Rebound

The economy grew 0.5 percent from a year earlier, the report showed. Economists forecast a 0.7 percent expansion.

“The Australian economy has weathered the global financial crisis well,” Ted Evans, chairman of Westpac Banking Corp., said in a speech at the company’s annual general meeting in Melbourne today. “To a significant extent, that reflects the prompt stimulatory action by the Australian government.”

Today’s report adds to global evidence of an economic rebound. Europe’s economy emerged from its worst slump in more than six decades in the third quarter, expanding 0.4 percent from the previous three months, a report showed on Dec. 3. The U.S. economy grew at a 2.8 percent annual pace.

Australia’s economy is expanding faster and generating more jobs than the government and central bank forecast at the start of the year as China’s demand for raw materials including iron ore, coal and gas prompts mining and energy companies such as BHP Billiton Ltd., Woodside Petroleum Ltd. and Santos Ltd. to increase investment and hire workers.

Jobs Surge

The nation’s benchmark S&P/ASX 200 index has climbed 26 percent this year, outpacing the Standard & Poor’s 500 index, which has gained 23 percent.

Treasurer Wayne Swan last month forecast GDP will rise 1.5 percent in the 12 months through June 30, 2010, compared with a May prediction of a 0.5 percent contraction. The central bank says the economy will grow 2.25 percent this fiscal year and 3.25 percent in 2010-11.

Employers added 99,500 workers between the start of September and Nov. 30, the biggest three-month hiring surge in three years, a report showed last week. The jobless rate fell to 5.7 percent from 5.8 percent.

Chevron Corp. said this month it has signed a deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone venture in Western Australia. The project, estimated to be worth $82 billion, is forecast to generate 6,500 jobs during construction.

It is in addition to the $39 billion Chevron-led Gorgon gas venture, also in Western Australia, which is forecast to create 10,000 jobs when construction starts early next year.

‘Cusp of Boom’

Favorable domestic conditions and overseas demand for Australian resources mean the country may be on the cusp of an economic boom, Gerry Harvey, chairman of Australia’s biggest electronics retailer Harvey Norman Holdings Ltd., said in an interview with Bloomberg television on Dec. 2.

“We’ve had very good sales figures in October and November and I can’t think of any reason why that won’t follow into December,” he said. “I think we’ll have a record Christmas.”

Stronger economic and jobs growth will increase Governor Stevens’s scope to raise borrowing costs next year. He boosted the overnight cash rate target by a quarter percentage point on Dec. 1 to 3.75 percent, adding to similar moves in October and November. By contrast, rates are close to zero in the U.S. and Japan.

“Members agreed that, if developments unfolded as currently expected, monetary policy would need to be adjusted further over time to lessen the degree of stimulus,” central bank officials said in minutes of their Dec. 1 meeting released yesterday.

The Australian dollar has gained 29 percent this year against the U.S. currency as investors seek higher-yielding assets in a so-called carry trade that Reserve Bank Assistant Governor Guy Debelle said last week is “back in vogue.”

Rate Outlook

Policy makers weighed “the high level of the exchange rate” when making their decision to raise interest rates this month, according to yesterday’s minutes.

Investors are betting there is a 58 percent chance of a quarter-point increase in the benchmark lending rate to 4 percent at the central bank’s next meeting on Feb. 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 7:26 a.m.

The statistics bureau, which normally publishes third- quarter GDP figures in the first week of December, delayed publication of the report this year by two weeks as officials adopt new accounting standards.

The chain price index, a measure of retail prices, rose 0.4 percent from the second quarter and fell 3.1 percent from a year earlier, today’s report showed.