(Australian Associated Press)
The Australian economy has finally shaken off the aftermath of the mining boom, growing at its fastest pace in nearly six years.
The economy expanded by 0.9 per cent in the June quarter and 3.4 per cent over the 12 months to June, national accounts data released on Wednesday shows.
The growth exceeded economists’ expectations for quarterly growth of 0.7 per cent and an annual improvement of 2.8 per cent.
The latest annual growth is the steepest since September 2012, when the mining boom reached its peak.
Australians splashing their cash played a starring role in growth in the three months to June, the Australian Bureau of Statistics figures show.
Household expenditure was up 0.7 per cent, helping to push domestic demand 0.6 per cent higher.
New Treasurer Josh Frydenberg was quick to link the spending with recent improvements to the number of Australians in work.
“You get more people earning more money, there’s more spending, and that has a real impact on generating more product across the economy,” he told reporters in Canberra.
Employment improvements have also chipped into a rise in compensation to employees, he said.
Such compensation, reflecting wages and salaries, grew by 0.7 per cent for the quarter.
But Labor finance spokesman Jim Chalmers said wages are rising far slower than company profits and while people may be spending more, they are saving less.
The household savings rate fell to 1.0 per cent in the June quarter, down from 1.6 per cent in the three months to March and 2.5 per cent from last June.
“It’s not a sustainable way for us to grow the economy to have decade-low household savings,” Mr Chalmers told reporters.
“Growth in this country needs to be inclusive and it needs to be bottom-up.”
ANZ senior economist Felicity Emmett said the falling household saving rate “raises a question” about the sustainability of consumer spending.
But CommSec chief economist Craig James said wages are keeping on top of the cost of living.
He expects Australians will keep on spending as interest rates remain low and stable, adding to growth going forward.
“Home building, exports, business investment and spending on infrastructure will also support the economy over the next year,” he said.
Mr Frydenberg said lifting wages is an important challenge for the government.
He said he expects wages will go up as the economy keeps expanding, a process which is no longer being held back by the unwinding of the mining investment boom.
Prime Minister Scott Morrison earlier hailed the strong economy as the means to providing services such as the National Disability Insurance Scheme.
“If you don’t have a strong economy, then you can’t support nation-changing programs like this,” he told reporters.
The June quarter growth comes after the economy grew by 1.1 per cent in the March quarter, according to revised figures, and double the rate of growth in the preceding December quarter.