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Recession avoided as economy bounces back

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The Australian economy has avoided a recession, bouncing back to positive territory in the final three months of 2016.

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The economy expanded by 1.1 per cent in the December quarter, faster than expected by economists, after a shock 0.5 per cent decline in the previous three months.

The annual rate lifted to 2.4 per cent from 1.8 per cent, according to the Australian Bureau of Statistics.

The main contributions to growth came from household consumption and government spending, the data released today showed.

Ahead of the report, Treasury secretary John Fraser told a senate committee the fundamentals of the economy are “sound but finely balanced”. But as last year’s contraction showed, it remained sensitive to shocks.

Fraser also said the economy had been generating enough jobs to maintain a stable unemployment rate.

“But there is still spare capacity in the labour market,” he said.

The economy was still working through a complex transition away from mining investment and towards broader growth in an uncertain international economic climate.

“In this environment, we should ensure we are in the best possible position to benefit from an upswing (in the global economy), in particular by maintaining our openness to trade and investment,” he said in Canberra.

Treasurer Scott Morrison said the Australian economy was growing faster than every G7 nation and above the OECD average.

The latest growth figure confirmed the successful change that was taking place in the economy as it moved from the largest resources investment boom in our history to broader-based growth.

“While this growth result is welcome, we must continue to remember that our growth cannot be taken for granted and is not being experienced by all Australians in all parts of the country in the same way,” Morrison told reporters in Canberra.

“As a government, we are extremely mindful of these differences.”

Morrison said you could not achieve inclusive growth if you did not have growth in the first place.

“What was particularly encouraging was that economic growth in the December quarter was more broad-based, across all of the contributing sectors,” he said.

The treasurer noted the improvement in business investment.

“While we welcome this result … to lift wages and increase jobs, to increase the number of hours people have access to, we must continue to pursue policies that encourage investment,” he said.

And that meant implementing the government’s $50 billion plan for company tax cuts.

Morrison said a decline in wages growth during the December quarter was disappointing and was weighing heavily on the budget’s revenue predictions.

“This is why the core task of the government is to increase what hard-working Australians can earn … generating more hours and more jobs in our economy.”

– AAP

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