Business

Australian economy picks up pace on exports

Sydney Harbour Image copyright AFP
Image caption Exports gave a big boost the economic growth in the third quarter

Australia's economy grew more than expected, picking up pace in the second half of the year as exports rose.

The economy grew 2.5% in the three months to September from a year ago, compared with 1.9% in the previous quarter and above forecasts of 2.4%.

It grew 0.9% from the previous quarter, also beating expectations of 0.8%.

Despite a slowdown in its biggest trading partner, China, and falling commodity prices, exports rose, giving the economy a boost.

Exports jumped 4.6% in the quarter, adding one percentage point to gross domestic product (GDP) growth.

This was during a period when the Australian dollar dropped 9% on record low interest rates in the country as the central bank tried to boost economic activity.

The Australian dollar surged to its highest level in almost seven weeks to $0.7345 after the growth figures were released.

Record low rates

Just a day earlier, the Reserve Bank of Australia had left its key interest rate unchanged at a record low of 2%, and also provided an upbeat view of the economy.

But Paul Dales, chief Australia economist at research firm Capital Economics said that the strong performance in exports is unlikely to be sustained.

"With overseas demand soft, we are not convinced that net trade can completely fill the hole [from declining mining investment ahead]," he said in a note.

"This is the main reason why we doubt that economic growth will accelerate significantly next year."

Australia's economy has been seeing moderate growth in recent years after investment in the mining sector - which had been a key driver for growth over a decade - peaked.

Resource companies in the country are in the midst of scaling back operations and cutting production costs to cope with slumping commodity prices.

In reaction to the growth figures, Sydney's benchmark S&P/ASX 200 closed down 0.2% to 5,258.30 points on Wednesday.

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