The Australian economy continues to power along, with the latest figures from the Australian Bureau of Statistics showing the economy grew by a seasonally adjusted 0.9% during the December quarter.
The main positive contributors to expenditure were private capital formation expenditure on machinery and equipment at 0.8%, public gross fixed capital formation at 0.6% and household final consumption expenditure at 0.4%. Imports were the largest negative contributor at 1.6%.
CommSec economist Craig James said in a statement this result indicates GDP grew by 2.7% over the year, and is “the best result in almost two years”.
“The stimulus boost provided by the tax breaks resulted in a considerable rise in business investment. Also contributing to growth was household and government spending and to a lesser extent inventories.”
Meanwhile, the Australian services sector contracted during February for a second consecutive month due to higher interest rates, a private survey has found.
The Australian Industry Group – Commonwealth Bank performance of services index rose by 0.9 points to 48.3, still below the 50-point level separating expansion from contraction.
AIG chief executive Heather Ridout said in a statement consumer-related services sectors were affected the most by interest rates and the withdrawal of Government stimulus funds.
Sales of services fell for the first time in five months, with that sub-index dropping 4.4 points to 47.3, while supplier delivery levels lifting 3.3 points to 49.5.
“The significant degree of consumer caution is clear from the lack of expansion in activity this year in accommodation, cafés and restaurants, personal and recreational services and wholesale trade.”
“Businesses in these sectors will be looking to the better national employment outcomes of recent months to support an improvement in household discretionary spending in the face of yesterday’s interest rate rise.”
Shares higher after Wall Street rise, GDP data
The Australian sharemarket has opened higher today due to good results on Wall Street, and has continued to perform after it was revealed GDP grew by 0.9% in the fourth quarter of 2009.
The benchmark S&P/ASX200 index rose by 33 points or 0.71% to 4735.2 at 12.20 AEST, while the Australian dollar also rose to US90c driven by strong commodity prices.
Commonwealth Bank shares increased by 0.3% to $55.11, while NAB rose by 1.6% to $26.00. AMP lost 1.3% to $5.98 as Westpac gained 0.9% to $26.98 as it announced it would match the RBA in yesterday’s interest rate rise.
The bank announced it would lift its standard variable home loan interest rate and variable business lending rate by 0.25% to 7.01%, with the rises effective from March 5. The announcement comes after Commonwealth Bank and ANZ announced their own rises yesterday.
“Westpac continues to support customers by providing a range of competitive home and business loans as well as some of the most attractive deposit rates in the market,” group executive of retail and business banking, Rob Coombe said in a statement.
Macquarie Group has said it is planning to float oil and gas services firm Miclyn Express Offshore in an IPO which could raise up to $365 million.
The company said it plans to cut its stake in the company to 30% from the current level of 59%. Shares are being priced at between $1.85 and $2.30.
Bowen praises economy, calls for “better” regulation
Financial services minister Chris Bowen has said many changes currently being made with regards to regulation will create better environments for productivity and reduce costs for businesses.
However, he also said areas need to be improved despite Australian’s economy withstanding the global financial crisis.
“There are some instances where events of the last two years have highlighted the need for a more interventionist regulatory approach to deal with market failures, externalities and simply bad corporate behaviour,” he said at the Australian Securities and Investment Commission summer school.
“The Australian government’s response to this is that the key to proper regulation is to have better regulation, not more regulation.”
Bowen also repeated figures which suggested Australia was the best performing advanced economy in 2009.
Overseas, Wall Street stocks rose due to some prominent mergers and acquisitions, negating weak auto sales data. The Dow Jones Industrial Average gained 2.19 points, or 0.02% to 10,405.98.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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