8:00 PM Sydney – Australian economy expanded at 1.3% in the March quarter and registered its second best growth rate in the last five years. The surprise strength in the household spending added to the strong investment in the mining sector. Four largest banks failed to pass along the latest rate cut.
Stocks in early trading in Sydney surged after the release of the first quarter economic growth data but in the late afternoon gave up most of the gains.
Australian economy expanded in the March quarter at 1.3% from the previous quarter revised growth of 0.6%. The quarterly growth was the second best growth following the quarter after the Queensland flooding in the last five years.
The economic growth for the four quarters ending in March was 4.3% and indicated annual rate for the rest of the year at 5%.
The sharp jump in the headline number was driven by a surprise increase of 1.6% in household spending and contributed 0.9% to the GDP growth data.
Mining sector, the dominant sector in the economy grew 14% in the first quarter on the 20% jump in private infrastructure spending.
The growth in other industries also surprised most economists after financial services increased 1.7% and service sector gained 2.8%.
The so called two-speed economy of the Australia was in full display in the final demand across the nation. The demand in Western Australia rose 13.6% and in Queensland surged 7.8% whereas the demand in New South Wales rose 2.1% and in Victoria increased 1.9%.
The ASX 200 index gained 11.60 to 4,055.30 and All Ordinaries index rose 12.29 to 4,104.66. Qantas dived to a record low after it estimated 91% plunge in full year profit.
The Australian dollar rebounded to 98.62 U.S. cents.
In trading, turnover was 1.5 billion shares worth $4 billion and 549 stocks gained, 390 declined and 406 were unchanged.
David Jones Limited fell 2 cents to $2.10, Harvey Norman Holdings closed down at 3 cents to $1.85 and Woolworths rose 3 cents to $26.35.
Kathmandu increased 9 cents to $1.14. Billabong International Limited added 1 cent to $1.87.
BHP Billiton Limited decreased 6 cents to $31.10 and Rio Tinto Limited advanced 50 cents to $54.25. Fortescue Metals Group unchanged to $4.55.
Lynas Corporation Limited fell 1 cent to $1.0 and Iluka Resources slipped 19 cents to $12.49. Newcrest Mining gained 65 cents to $25.71 and Kingsgate increased 18 cents to $5.83.
Gloucester Coal closed up at 10 cents to $6.92 after the company approved the merger with China based Yancoal Australia.
Oil Search Limited added 4 cents to $6.58 and Santos Limited increased 10 cents to $11.74 and Orica gained 25 cents to $24.08.
None of the four major banks passed on the latest rate cut from the Reserve Bank of Australia.
Commonwealth Bank of Australia rose 5 cents to $50.05 and Bank of Queensland down 1 cent to $6.54. ANZ added 2 cents to $21.34. National Australia Bank slumped 30 cents to $22.25 and Westpac Banking Corporation closed down at 24 cents to $20.35.
Stockland increased 8 cents to $3.23, Leighton gained 15 cents to $16.98 and Toll Holdings closed down at 4 cents to $4.38.
Qantas slides 3 cents to $1.12 after the airline estimated full year net profit to be between $50 million and $100 million compared to $552 million a year ago. The sharp revision dragged the stock to a new record low of $1.10.