(Bloomberg) — Australia’s economy expanded faster than forecast in the first three months of the year, led by household consumption, bolstering the case for the central bank to keep raising interest rates.
Gross domestic product advanced 0.8% from the final three months of last year, higher than economists’ estimate for a 0.7% increase, Australian Bureau of Statistics data showed Wednesday. That took annual growth to 3.3%, outpacing the pre-pandemic average of around 2% and economists’ estimate of 3%.
The household saving to income ratio fell to 11.4% from 13.4% as the increase in household spending outpaced growth in household income, the ABS said, highlighting rising living costs.
Australia’s three-year government bond yield rose after the release, trading at 2.918% at 11:39 a.m. in Sydney.
New Prime Minister Anthony Albanese has acknowledged the strength of the A$2.2 trillion ($1.6 trillion) economy, while pointing to a darkening global outlook and accelerating inflation that’s squeezing household income.
The Reserve Bank of Australia will see the data as validation of its hawkish stance after raising rates for the first time in 11-1/2 years last month to 0.35%. Money markets are pricing in a benchmark of 2.7% by year’s end.
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Australia’s labor market is the tightest in almost 50 years and consumer spending has remained solid in the face of soaring prices. Both RBA Governor Philip Lowe and Albanese are hoping a jobless rate below 4% will spark a faster pick-up in wages, which rose at just half the pace of CPI in the first quarter.
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Australia’s GDP Exceeds Estimates, Signaling Further Rate Rises