MW: Australia's economy expands on resources exports
By James Glynn
SYDNEY--Australia's resource-rich economy expanded in the first quarter of 2014 supported by surging mining-related exports.
Gross domestic product grew by 1.1% in the quarter from the prior one and 3.5% from the same quarter a year earlier, a government report showed Wednesday. Economists had expected 1% growth on quarter and a 3.3% year-on-year gain.
Exports of iron ore surged in the first quarter from ports in the country's northwest. The government said a quieter-than-usual cyclone season also allowed volumes of the ore, used to feed Chinese steel mills, to soar.
Australia is emerging from a decadelong mining investment boom and is now reaping the benefits of expanded mine, rail and port facilities. But while growth appears robust, economists say the economy remains fragile.
Growth may slow going forward as mining investment continues to wind down over the next year as large gas projects are completed. Exporters also face headwinds from lower commodity prices and an historically still-strong Australian dollar.
Consumer sentiment has also fallen to near-recession levels in the past few months after the conservative government announced new tax and spending cuts in its 2014-15 budget.
Australia's central bank has cut interest rates eight times since November 2011 to help spur struggling parts of the economy as a resources investment boom fades. It kept its cash rate at 2.5% at a policy meeting on Tuesday, saying the most prudent course of action was likely a period of low interest rates.
There are some bright spots in the economy, most notably housing construction, which is expected to boom in the coming year.
