Company profits and inventories in Australia rose higher-than-expected in the first three months of 2017, prompting economists to tip a modest GDP growth for the quarter.
However, wages growth remained depressed, rising only 0.3 per cent on a quarterly basis, underlining the central bank's concerns about its likely impact on consumer spending.
Gross operating profits rose 6.0 per cent in the March quarter, on a seasonally adjusted basis, data from the Australian Bureau of Statistics showed on Monday.
Profits jumped by 39.7 per cent over the 12-month period to March.
The quarterly rise was led by a 13 per cent increase in mining company profits on the back of a strong run in coal and iron-ore prices at the time.
The non-mining sector profits also rose two per cent, helped by retail trade profits lifting a healthy 4.9 per cent, although the accommodation and food services sector was down 8.9 per cent.
Estimated business inventories, in seasonally adjusted chain volume terms, rose 1.2 per cent in the March quarter, which economists said would add to GDP growth in the March quarter.
"Data now suggests upside risk to our view and the chance of a negative print has materially reduced," UBS economist George Tharenou said.
He is tipping 0.2 per cent GDP growth, although others in the market expect a more positive 0.4 per cent increase.
Market expectations for quarterly gross domestic product figures, due out on Wednesday, are modest given soft consumer spending on the back of high underemployment and weak wages growth.
However, the inventory build-up could be a drag on growth in future quarters, some economists warned.
"Rising mining inventories are an ominous sign for the export sector and we forecast net trade to drag 0.6 percentage points off real GDP growth in the first quarter," JP Morgan economist Tom Kennedy said.
"We remain of the view that the economy will perform below trend this year which calls into question the RBA's view that monetary conditions are accommodative enough," he added.
Estimated growth in wages and salaries was 0.3 per cent higher for the quarter and 0.9 per cent higher for the year.
Citi economists said in a note that the wages figures showed labour income "continues to shrink as a proportion of the GDP pie".
"It also suggests that unit labour cost growth will remain tepid," the Citi team said.
"This is important because it influences domestic CPI and therefore matters for the Reserve Bank."
