SYDNEY – Australia's economy likely grew strongly in the second quarter, shrugging off the effects of a cyclone in March and building momentum driven by soaring business confidence and higher commodity prices.
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Recent surveys of Australian firms show they are more confident about the outlook than they have been in many years. That optimism is showing up in rising non-mining investment and in hiring. A full-time jobs boom is finally emerging, though it has yet to generate the kind of wage growth that might boost consumption and lower household debt.
A survey of 10 economists by the Wall Street Journal points to gross domestic product growth of 0.9% in the second quarter from the previous three months and 1.9% from a year earlier.
Investment data released Thursday showed that companies estimate they would invest $102 billion Australian dollars in new projects in the year to June 30, 2018, an 18% increase from a June estimate, according to the government statistician.
"This encouraging result is a welcome change from the past two years of stagnation," said Daniel Gradwell, an economist at ANZ Bank.
Reserve Bank of Australia Gov. Philip Lowe reflected the rising optimism among policy makers in comments after a policy meeting Tuesday, saying that recent data had supported the bank's narrative on growth.
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The RBA forecasts year-on-year economic growth will accelerate to 3% over the next couple of years.
The central bank kept rates on hold Tuesday, as it has done for over a year, but its tone on the economy has become increasingly positive as it communicates its rising satisfaction with the job market and investment.
Data this week showed job advertising has risen for five months in a row.
Iron ore prices, still an important factor for fueling growth in the economy, has been higher than expected over recent months, fanning confidence and generating added income for resource companies.
Still, lingering pessimism among consumers continues to cloud the otherwise sunny outlook for the economy.
Record household debt combined with slow wage growth is keeping Australians' cash in their wallets.
A further complication is coming from the Australian dollar. It has risen to its highest levels in over two years in recent months. That could weigh on exports, economic growth and inflation.
Write to James Glynn at firstname.lastname@example.org
(END) Dow Jones Newswires
September 05, 2017 05:43 ET (09:43 GMT)