Australia’s economy has rebounded, recording 1.1% growth in the December 2016 quarter.
The result reverses the shock negative result in the September quarter and means Australia has avoided a recession, as was widely projected by market economists.
Figures released by the Australian Bureau of Statistics on Wednesday show Australia’s gross domestic product (GDP) has now grown 2.4% through the year, below the long-term average of about 2.75%.
Despite the high 1.1% seasonally adjusted growth figure, trend growth in the quarter was 0.3% and the trend annual growth was just 1.9%.
The treasurer, Scott Morrison, said the result was achieved due to strong household consumption, but warned that “weak wages growth” was still weighing the economy and budget revenue down.
Australia has now recorded 101 quarters between the June 1991 and the 2016 December quarter without two consecutive quarters of negative economic growth.
Australia continues to close in on the Netherlands’ record of 103 quarters without a recession, which Deloitte Access Economics has predicted it will surpass this year.
The ABS found that household final consumption expenditure contributed 0.5% to GDP growth and net exports a further 0.2%.
Public and private capital formation contributed 0.3% this quarter after both detracted from GDP growth last quarter.
The terms of trade grew by 9.1% in the December quarter due to strong price rises in coal and iron ore. The terms of trade are now 15.6% higher than the December quarter of 2015.
In the September quarter Australia’s gross domestic product contracted by 0.5%, the first negative quarter in five years.
Responding to the improved results, treasurer Scott Morrison lauded the fact Australia is growing faster than every G7 economy and the OECD average.
“[The result] confirms the successful change that is taking place in our economy as we move from the largest resources investment boom in our history to broader-based growth,” he said.
Morrison noted it was the “first time ... for a while” that final-state demand for all states and territories had grown in the December quarter.
The treasurer said the principle driver for growth was “a solid rebound in household consumption” which occurred “despite subdued wages growth”.
“Of concern in these accounts is that compensation of employees in the quarter declined by 0.5%. It was up 1.5% in the year.”
Morrison said that the combination of better prices and higher trade volumes had “a significant impact on company profits, especially in the resource sector”.
“However, I caution it would be wrong ... to assume that those gains have been experienced evenly across all businesses in the economy.”
The chief Australian economist for Capital Economics, Paul Dales, warned that despite the result “economic growth will probably still disappoint this year”.
“In the second half of last year the economy grew by just 0.6% and we know that the collapse in mining investment has further to go,” he said.
Dales warned that recent falls in building approval meant dwelling investment may soon fall and record low wage growth would lower household spending.
“In other words, the boost to national income from higher commodity prices will mostly boost profits rather than activity.”
Shadow treasurer, Chris Bowen, said the GDP result was welcome and an expected bounce after “the horrible negative quarter last year”.
Bowen said stronger household consumption was “largely attributable to people drawing down heavily on their savings instead of any boost to their wages which are growing at generation lows”.
“The national accounts show that corporate profits surged while wages and salaries in the economy fell in December,” he said, noting that penalty rates had just been cut by the Fair Work Commission for 700,000 workers.
Before the release of the figures on Wednesday, the Treasury secretary, John Fraser, told Senate estimates the September result showed the “economy remains sensitive to shocks”.
“There were some factors likely to be of a one-off nature such as the weather related disruptions in the construction sector.
“However that there is no denying that it was a very weak quarter.”
Fraser said he did not believe the result represents the “underlying pulse” of the economy and treasury and market economists expected it to rebound.
He said in the mid-year economic and fiscal outlook Treasury projected 2.75% growth in 2017-18.
