Australian growth slowed to 0.5 percent in the March quarter despite the withdrawal of large-scale stimulus spending, official figures showed Wednesday, raising hopes the recovery is self-sustaining.
Treasurer Wayne Swan called the data, including 2.7 percent growth in the 12 months to March, a "solid outcome" which reflected Australia's performance as the only advanced economy to defy recession during the global downturn.
"Australians should have great confidence in the fact that we have another very solid outcome for an economy which continues to be one of the best in the developed world," he told reporters.
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"This is more evidence that we got in and we did what was necessary during the global recession and we now are seeing the fruits of that again."
The Australian Bureau of Statistics said gross domestic product (GDP) was up 0.5 percent from the previous quarter, underpinned by an 11.6 percent jump in public investment and 0.6 percent growth in household spending.
The economy expanded 2.7 percent over the 12 months to March 2010, while growth for the December quarter was revised up from 0.9 percent to 1.1 percent.
Government spending on buildings and infrastructure - part of an aggressive 50 billion US dollar stimulus package - was the main driver of positive growth, adding 0.7 percentage points over the quarter.
But growth was slowing overall, dropping from 1.1 percent in the December quarter and 0.6 percent in the same period last year, following the winding back of stimulus and a series of rate hikes that dampened consumer spending.
Figures better than forecasted
The figures beat forecasts by economists, who predicted quarterly growth of 0.4 percent and 2.4 percent over 12 months.
"We've had a far shallower downturn than major advanced economies and we're recovering from a position of strength," said Swan.
"Unlike many other economies we are not wading through the rubble of capital destruction, small-business closures and prolonged and high unemployment as we set about building for the future."
Swan said the withdrawal of stimulus subtracted about 0.10 percentage points from quarterly growth, but the data showed "tentative signs that a self-sustaining private sector recovery is in prospect".
Terms of trade increase
He also pointed to a 4.2 percent rise in resource-rich Australia's terms of trade in the quarter.
"With demand for commodities accelerating and export prices expected to continue to rise, the prospects for exports are very positive," Swan said.
Analysts said the growth slowdown was not as sharp as feared, and noted that the underlying fundamentals looked strong.
"On an annual basis, it still looks pretty good," said AMP economist Shane Oliver.
"My feeling is we'll see consumer spending pick up in the second quarter, dwelling activity will pick up and so will business investment, and that should push GDP back up to 0.8 percent to 0.9 percent growth."
Australia's central bank this week held interest rates at 4.50 percent, pausing an aggressive series of hikes since it became the first advanced economy to shift away from stimulatory settings in October.
Instead of contracting 0.5 percent as forecast in last year's budget, Australia's economy grew 2.0 percent in 2009-10 and Swan flagged a powerful rebound in growth to 3.25 percent in 2010-11 in last month's annual budget.
Swan then said GDP would hit 4.0 percent in 2011-12, as Australia "defied global economic gravity" to outperform the world's major economies.
He said Australia's resilience, thanks to Asian resource exports and the stimulus spending, meant it would be debt-free by 2012-13 --= three years earlier than expected.
Australian stocks rallied on the news, with the S&P/ASX200 up 0.21 percent.
