GDP: Australia's economic growth improves but disappoints the optimists

Non-dwelling construction such as work on the new Perth Stadium was the biggest contributor to growth through the quarter

GDP: Australia's economic growth improves but disappoints the optimists

Wednesday's data from the Australian Bureau of Statistics showed the gross domestic product (GDP) grew by 0.6 percent in the third quarter, slowing from the previous quarter when it rose 0.9 percent.

Compensation of employees increased in all states and territories, resulting in a national quarterly growth of 1.2 percent and yearly growth of 3.0 percent.

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Despite higher household income, household consumption was weak at 0.1 percent, in line with the retail trade estimates.

Morrison said the important thing to focus on was private investment, because its contribution to growth more than tripled in the quarter.

Indeed, household consumption rose just 0.1 percent in the quarter, the smallest increase since late 2012.

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Treasurer Scott Morrison welcomed the acceleration in on-year growth, focusing on the jump in company spending.

"This is above the OECD (Organisation for Economic Co-operation and Development) average and puts Australia back up towards the top of the pack for major advanced economies around the world", he added.

Australian firms are experiencing the best trading conditions in 20 years, recording strong profits and adding full-time staff at a strong clip.

The ABS observed that 17 out of 20 industry sectors recorded growth this quarter, with professional, scientific and technical services leading the way, along with health care and social assistance, and manufacturing.

"The jobs market should remain strong, providing much-needed support to household incomes growth", he said.

Bill Evans, chief economist at Westpac, said pressure is building on consumers and it is forcing a change in spending patterns that threatens to choke off growth.

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The improved annual growth figure was assisted by the negative September quarter data from a year ago dropping out, and it takes Australia close to what would be considered average levels of economic expansion.

The third quarter saw big increases in electricity costs and more recent rises in fuel prices are also eating into any remaining slack consumers may have for additional spending.

Australia started its 27th year of unprecedented economic expansion, posting the strongest annual growth rate in 15 months.

Still, the government is betting on strong consumer spending to support stronger GDP growth and an improvement in its budget over time.

"It is probably too early to say that this is the beginning of a new trend, but given the unsavoury mix of headwinds facing the consumer at present, alarm bells should be ringing", Ms Auld said.

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