Australian economy picking up speed

Australia's economy expanded a better-than-expected 0.8 percent in the last three months of 2013 as the commodity-powered nation's transition away from its reliance on the mining sector picked up speed, data showed Wednesday. The Australian Bureau of Statistics figures compare with analyst expectations of 0.7 percent growth in October-December, while on-year growth came in at 2.8 percent, against the 2.5 percent forecast by economists. Treasurer Joe Hockey said the statistics showed Australia "could do better", but he was optimistic as the economy moves away from the Asia-led mining investment boom into the production and export phase. "Today's numbers highlight the growth challenge that the economy will face in the next couple of years as construction on a number of large mining projects comes to an end," Hockey said. "The trends revealed today indicate we are heading in the right direction." The data, which helped the Australian dollar surge towards 90 US cents from Tuesday's 89.31 US cents, showed exports were the main contributor to growth but Hockey said there were also positive signs in an increase in household spending and construction of homes. The transition in the economy is unquestionably continuing at pace, as expected," Hockey said. "The best thing that we can do is grease the wheels of this transition." As the government tries to build growth in the non-mining sector, Hockey said the conservative administration of Prime Minister Tony Abbott would work to do this by removing taxes and regulations they believe impede business - Good news for jobs - The latest figures add to suggestions that the economy is at an upwards turning point, with the numbers coming despite weakness in major market China and turmoil in the domestic manufacturing sector. "What really drove the result was an indication that the mining to non-mining transition is occurring at a faster pace than what we previously saw," said Commonwealth Bank economist Diana Mousina. It was really encouraging to see that residential construction is firmly picking up, that's what we've seen in building approvals trends in the past few months." Mousina said after a period of weakness, economic growth was likely to improve in 2014, boding well for jobs given that unemployment is at its worst point in a decade, hitting 6.0 percent in January. But Daniel Martin, Asia economist with Capital Economics, said 2014 was still likely to prove a difficult year for Australia. "Admittedly, a weaker Australian dollar, lower interest rates and a recovery in the housing market will all support growth in 2014," he said in a note. "But with business investment set to weaken on the back of slower growth in China and consumer spending likely to be held back by high levels of household debt, we expect overall growth to slow to just 2.0 percent year-on-year, down from 2.4 percent in 2013." On Tuesday, the Reserve Bank of Australia left interest rates on hold at their historic low of 2.5 percent, saying "the most prudent course is likely to be a period of stability in interest rates". But the central bank's governor Glenn Stevens did point to improving business confidence and trading conditions. National Australia Bank senior economist David de Garis said Wednesday's growth figures were unlikely to alter the RBA's neutral stance. "They'll still be looking for domestic final demand really to show a bit more grip," he said. "They are already seeing that in the housing sector in yesterday's building approvals but beyond that, it's patchy."