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Australia adjusting from mining-led economy

March 8
5:08 AM 2016

Australia's latest growth numbers indicate picking up of pace in its economy during the fourth quarter. Australia witnessed an annualized growth rate of three percent, the fastest in two years. The country's economy grew three percent as against the forecast of 2.5 percent.Its latest GDP numbers further reveal the adjusting mode of Australia from mining-led economy. 

The world's 12th largest economy is growing amid sluggish commodity markets. Australia's gross domestic product (GDP) rose by 0.6 percent in fourth quarter compared with 1.1 percent growth in the previous quarter.

National Accounts Data further reveals the encouraging consumer spending in Australia particularly in bubble cities such as Sydney and Melbourne. The services sector is doing well for Australian GDP, while restructure in domestic economy is taking place. The Australian economy is also adjusting from the mining-led part of the economy, according to The Diplomat.

It was noted that the GDP growth rate for the US is about one percent, 1.1 percent for Eurozone and the 1.9 percent for UK. The Australian economy is above the growth rates of these countries. Australian Treasurer Scott Morrison sees a continued transition from the largest resources investment boom in the country to broader-based growth. 

Morrison said "We are growing faster than every economy in the G7 and growing well above the OECD average. We are growing faster than the United States and the United Kingdom, more than twice the pace of Canada - a comparable resource-rich advanced economy - and we're matching growth rates in economies like South Korea."

After a decade-long boom led by mining sector, the country's economy is successfully rebalancing, according to Reserve Bank of Australia (RBA). The low inflation rate further indicates possible interest rate cuts if needed, as reported by The Sydney Morning Herald

Australia is performing better than other commodity-based economies such as Canada. Since 1992, the Australian economy has been growing on an average rate of 3.3 percent. The disappointing factor, however, is the poor performance of foreign trade. Exports didn't contribute much to the Australian economy during the fourth quarter.

Meanwhile, the Australian dollar rose 0.7 percent to $0.7234 against US dollar while the gross fixed capital expenditure fell 0.6 percent in fourth quarter. Consumer spending, on the other hand, grew 0.7 percent on a seasonal- adjusted basis. The GDP report comforts Reserve Bank of Australia to keep interest rate at a record low of two percent, according to CNBC.

Andrew Ticehurst, executive director and rate strategist at Nomura Australia, said "Our concerns are two-fold. First up, the real GDP data probably flatters the momentum in the economy. When you look at falling commodity prices and weak income growth, you get a softer picture."

Australia witnessed a loss of 7,900 jobs as per employment data for January 2016. Its unemployment rate rose to six percent in January from 5.8 percent in December 2015. 

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