Australia's economy enjoyed solid growth last quarter to again outpace its peers, with gross domestic product rising 0.6pc, moderating from the previous quarter when it jumped 1.4pc.
That left GDP up a brisk 3.7pc compared to the second quarter of 2011, with domestic demand showing a particularly strong rise of 5.9pc.
But while the economy had momentum then, the future looks more difficult as falling prices for key exports such as iron ore drain incomes and cool the red-hot mining sector, Reuters reports.
"The second half is going to be much more challenging," said Stephen Walters, chief economist at JPMorgan. "You're not going to get the same sort of growth rate we have had."
The Reserve Bank of Australia (RBA) on Tuesday left interest rates steady at 3.5pc but highlighted the recent sharp price falls in resource exports and admitted to uncertainty about the outlook for China, Australia's biggest customer.
Muted domestic inflation does mean the RBA has plenty of room to cut rates, which at 3.5pc are among the highest in the developed world.Spot iron ore, Australia's single biggest export earner at more than A$60bn a year, has tumbled by one-third since early July.
Already some miners are scaling back on their more ambitious expansion plans. Fortescue Metals on Tuesday slashed planned investment spending for fiscal 2013 by $1.6bn to $4.6bn. Still, Wednesday's data did show an economy outperforming its developed world peers.
Australia's annual growth of 3.7pc compared with 2.3pc in the United States and falls of 0.4pc in the European Union and 0.5pc in Britain.
Treasurer Wayne Swan was quick to point out the difference, telling reporters: "the Australian economy grew faster than every single major advanced economy both in the June quarter and over the year."
In all, GDP for the 12 months to June reached A$1.47 trillion ($1.5 trillion) in current dollars, or A$64,503 for each of Australia's 22.7 million people.
That compares with per capita GDP in the United States of $49,705. Among the main growth drivers in the second quarter were household consumption, with spending on new vehicles up almost 10pc, and 23pc for the year.
Business investment added only modestly to growth but that followed a barnstorming performance in the first quarter, with engineering spending up 60pc for the year.
Public spending was also surprisingly upbeat given the Labor government is committed to tightening fiscal policy to reach a budget surplus next year.
Yet falling export prices took a toll on the terms of trade, which dropped 0.6pc in the quarter and 7.1pc for the year. And it looks likely to fall a lot further this quarter given the recent plunge in iron ore prices.
That in turn will weigh on national income, through lower profits, wages and tax receipts. "A bit of momentum is not a bad thing to have given the ever-increasing global concerns," said Michael Blythe, chief economist at Commonwealth Bank.
"But the income story is turning against us in a fairly significant way." "In the last ten years it's been that ever-rising income boost from the terms of trade that's protected us. That insulation does look like it's a little frayed."
telegraph.co.uk
That left GDP up a brisk 3.7pc compared to the second quarter of 2011, with domestic demand showing a particularly strong rise of 5.9pc.
But while the economy had momentum then, the future looks more difficult as falling prices for key exports such as iron ore drain incomes and cool the red-hot mining sector, Reuters reports.
"The second half is going to be much more challenging," said Stephen Walters, chief economist at JPMorgan. "You're not going to get the same sort of growth rate we have had."
The Reserve Bank of Australia (RBA) on Tuesday left interest rates steady at 3.5pc but highlighted the recent sharp price falls in resource exports and admitted to uncertainty about the outlook for China, Australia's biggest customer.
Muted domestic inflation does mean the RBA has plenty of room to cut rates, which at 3.5pc are among the highest in the developed world.Spot iron ore, Australia's single biggest export earner at more than A$60bn a year, has tumbled by one-third since early July.
Already some miners are scaling back on their more ambitious expansion plans. Fortescue Metals on Tuesday slashed planned investment spending for fiscal 2013 by $1.6bn to $4.6bn. Still, Wednesday's data did show an economy outperforming its developed world peers.
Australia's annual growth of 3.7pc compared with 2.3pc in the United States and falls of 0.4pc in the European Union and 0.5pc in Britain.
Treasurer Wayne Swan was quick to point out the difference, telling reporters: "the Australian economy grew faster than every single major advanced economy both in the June quarter and over the year."
In all, GDP for the 12 months to June reached A$1.47 trillion ($1.5 trillion) in current dollars, or A$64,503 for each of Australia's 22.7 million people.
That compares with per capita GDP in the United States of $49,705. Among the main growth drivers in the second quarter were household consumption, with spending on new vehicles up almost 10pc, and 23pc for the year.
Business investment added only modestly to growth but that followed a barnstorming performance in the first quarter, with engineering spending up 60pc for the year.
Public spending was also surprisingly upbeat given the Labor government is committed to tightening fiscal policy to reach a budget surplus next year.
Yet falling export prices took a toll on the terms of trade, which dropped 0.6pc in the quarter and 7.1pc for the year. And it looks likely to fall a lot further this quarter given the recent plunge in iron ore prices.
That in turn will weigh on national income, through lower profits, wages and tax receipts. "A bit of momentum is not a bad thing to have given the ever-increasing global concerns," said Michael Blythe, chief economist at Commonwealth Bank.
"But the income story is turning against us in a fairly significant way." "In the last ten years it's been that ever-rising income boost from the terms of trade that's protected us. That insulation does look like it's a little frayed."
telegraph.co.uk
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