by David Dittman, Australian Edge
The Australian Bureau of Statistics (ABS) reported this week that the economy in the Land Down Under expanded at a rate of 0.6 percent during the last three months of 2012 compared to the July-through-September period.
ABS data show that gross domestic product (GDP) grew by 3.1 percent during the 12 months ended Dec. 31, 2012.
The quarter-over-quarter rate of growth was basically in line with expectations of analysts surveyed by Bloomberg News Service. Australian GDP grew by 0.7 percent during the third quarter of 2012.
The annual figure of 3.1 percent is basically in line with Australia’s long-term trend rate of growth. And it means that the “Lucky Country” has now posted 21 consecutive years of GDP growth, which is something no other economy in the developed world can match.
Australia grew by 3.6 percent in 2011, beating out Norway’s 3.2 percent expansion to lead major industrialized nations.
The ABS GDP data also illustrate, once again, the importance of resources to the Australian economy. The resources sector employs nearly a tenth of the country’s labor force and accounts for about a fifth of gross domestic product.
During the fourth quarter, despite continuing efforts by the Reserve Bank of Australia (RBA) to effect through interest rate cuts a rebalancing that better favors domestic manufacturers, exports were the largest contributor to growth in the quarter.
Shipments abroad of coal and iron ore drove a 3.3 percent increase in overall exports, according to the ABS, the second-fastest quarterly increase in almost a decade. Exports added 0.7 percentage points to the overall quarterly growth rate.
A series of cuts by the RBA to its overnight cash rate that’s taken the benchmark from 4.75 percent as of November 2011 to a present level of 3 percent has apparently yet to be felt at home.
Final demand in resource-focused Western Australia and the Northern Territory grew by 14.2 percent and 32.8 percent, respectively in the fourth quarter from a year earlier. By contrast, manufacturing-heavy Victoria saw a 0.1 percent decline and similarly situated Tasmania contracted by 4.6 percent.
Household spending, meanwhile, was up just 0.2 percent quarter over quarter, adding 0.1 point to the overall rate of growth. Australia’s household savings ratio declined to 10.1 percent from 10.3 percent in the third quarter.
Non-dwelling construction slumped 8.9 percent, subtracting 0.8 percentage points from GDP growth. Machinery and equipment fell 3.3 percent, subtracting 0.2 points.
The overall GDP figure was helped by the fact that public spending soared 24.6 percent, adding 1.1 points, on the transfer of an unidentified asset from private industry to state government.
In a statement released following the ABS report, Australian Treasurer Wayne Swan said, “Australia has managed to achieve solid growth in the December quarter at a time when around half of all advanced economies contracted, including five major advanced economies.”
Mr. Swan–a cabinet member in Prime Minister Julia Gillard’s beleaguered government and therefore predisposed to cheerleading, though the facts are on his side–added that “Australia’s around-trend growth rate over the past year is more than four times the OECD average.”
On Tuesday, March 5, ahead of the ABS’ GDP report, the RBA held its overnight cash rate steady at 3 percent. The central bank cut its benchmark to this level, a half-century low and equal to what it was during the depths of the Great Financial Crisis, in December and has signaled its readiness to further reduce it should economic conditions warrant.
This week, however, Governor Glenn Stevens emphasized allowing the impact of the 175 basis points of cuts from November 2011 through December 2012 to make its way into the domestic economy.
In his most recent statement on monetary policy Mr. Stevens noted, “During 2012, there was a significant easing in monetary policy. Though the full impact of this will still take more time to become apparent, there are signs that the easier conditions are having some of the expected effects.”
The RBA, taking note of “stabilization” of conditions around the world, including “moderate” US growth, “robust” growth in China and “considerably reduced” financial strains in Europe, also pointed out that commodity prices “are little changed recently, at reasonably high levels.”
Inflation expectations remain within the RBA’s target band, and the central bank still forecasts growth for 2013–about 2.5 percent–below long-term trend. Taking all this into account, Mr. Stevens still believes “an accommodative stance of monetary policy is appropriate.”
As well, indicating he remains dovish, Mr. Stevens noted, “The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand.” Nevertheless, the full RBA board found it “prudent” to leave its cash rate at 3 percent.
The RBA, which meets 11 times a year, or once a month except in January, will make its next monetary decision on April 2, 2013.
In The Roundup section of today’s Down Under Digest, which is available only to subscribers to Australian Edge, we report on earnings for the last eight companies in the AE Portfolio to post results during the recently concluded reporting season.
Six of the eight announced dividend increases along with results.
AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY), one of Australia’s largest gas and electricity distributors, boosted its fiscal 2013 interim dividend by 6.7 percent. AGL will pay AUD0.30 per share on April 4, 2013, to shareholders of record as of March 12, 2013. AGL shares traded ex-dividend on the Australian Securities Exchange as of March 5.
Natural gas distribution and pipeline company Envestra Ltd (ASX: ENV, OTC: EVSRF) announced a 3.4 percent increase in its interim dividend. Envestra will pay AUD0.03 per share on April 30, 2013, to shareholders of record as of March 22. That compares to an interim dividend of AUD0.029 paid in fiscal 2012.
M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF) also boosted its interim dividend, a 15.3 percent increase from AUD0.086732 for the first half of fiscal 2012 to AUD0.10 per share for the first half of fiscal 2013. Management’s guidance for the full year augurs more payout growth, too.
Solid operating results for Ramsay Health Care Ltd (ASX: RHC, OTC: RMSYF), Australia’s largest owner/operator of private hospitals, drove a 13.7 percent increase in its interim dividend, from AUD0.255 paid for the first half of fiscal 2012 to AUD0.29 for the first half of fiscal 2013. The AUD0.29 per share will be paid March 27, 2013, to shareholders of record on March 8. Ramsay shares traded ex-dividend as of March 4.
Movie theater and hotel operator Amalgamated Holdings Ltd (ASX: AHD, OTC: None) boosted its payout in respect of fiscal 2013 first-half results by 7.1 percent to AUD0.15 per share from AUD0.14 a year ago.
And, despite the fact that it booked a net loss of USD2.99 billion on asset writedowns of USD14.4 billion, Rio Tinto Ltd (ASX: RIO, NYSE: RIO) confirmed a final dividend of USD0.9167 per share, up from a final dividend of USD0.842. The full-year dividend of USD1.67 per share is 15 percent higher than 2011.