Australian growth slows as mining drifts

Australia's mining-powered economy grew a solid 0.6 percent in the three months to June and 3.7 percent from a year earlier, data showed yesterday, but was weighed by China's slowdown and European woes. The Australian Bureau of Statistics (ABS) figure was less than half the upwardly revised 1.4 percent in the first quarter of 2012 and below analyst predictions of 0.8 percent. Year-on-year growth slowed from 4.3 percent in the March quarter to 3.7 percent for the 12 months to June 30, the ABS said, in line with market forecasts. Treasurer Wayne Swan talked up the "robust" figures as proof of Australia's relative strength among developed nations "in the face of significant international headwinds". "While global economic conditions are likely to remain difficult for some time to come, today's national accounts demonstrate again our economic resilience," Swan said. "The Australian economy grew faster than every single major advanced economy both in the June quarter and over the year to June, and has successfully completed a stunning 21 consecutive years of economic growth — a feat not matched by any other advanced economy over this period." Consumer spending was the main driver of quarterly growth, contributing 0.6 percentage points to gross domestic product, with net exports — the value of shipments minus imports — adding 0.3 percentage points. The Australian dollar was little moved by the data, falling to $1.0207 from $1.0210 prior to its release. Though exports were robust the ABS said the terms of trade — the value of the country's exports relative to its imports — fell 0.6 percent, reflecting a fall in the bullish Australian dollar and slump in commodity prices as Chinese growth slowed and Europe grappled with sovereign debt issues. A decrease in the terms of trade means export prices are falling faster than import prices, and Swan said prices for Australian products shipped overseas — mostly iron ore and coal — had dropped 4.7 percent in the year to June. "Continued weakness in the major advanced economies and more moderate growth in emerging Asia have tempered demand for energy and steel inputs," Swan said. "Coinciding with continued strong growth in supply, this has led to recent falls in coal and iron ore prices." The value of production in the key mining industry contracted 1.2 percent in the quarter, subtracting 0.1 percent from GDP growth, according to the ABS. RBC Capital Markets chief economist Su-Lin Ong said the data showed the best of Australia's growth for 2012 was now behind it, with headwinds to the mining industry growing significantly in recent weeks. "The more timely data tells us that momentum is waning in the third quarter and will continue to wane over the course of the second half of this year," said Ong. Resources firms including BHP Billiton and Fortescue have recently shelved or scaled back projects in Australia due to worsening industry conditions and mining minister Martin Ferguson has warned the boom days are over. Swan acknowledged that commodity price falls "have weighed on some investment decisions" but noted that there was a record Aus$260 billion in mining spending already at an "advanced stage". "This means that the overall investment pipeline is more resilient to ongoing global volatility, providing ongoing support for our economy in these uncertain global times," the treasurer said. Canberra expects growth of 3.25 percent in 2012-13, while the Reserve Bank of Australia has tipped growth of between 2.5 and 3.5 percent and has forecast the mining boom to peak by 2014.