Australia's economy grew stronger-than-expected in the second quarter, pulling it clear of any lingering threat of recession and pressuring the Reserve Bank of Australia to raise interest rates within the next few months.
The economy grew a seasonally-adjusted 0.6% from the first quarter, the Bureau of Statistics said, the fastest pace of quarterly growth since the start of 2008.
The result easily beat economists' forecasts, which centred on just 0.2%, and built on growth of 0.4% in the first quarter. From a year earlier, gross domestic product was up 0.6% - the fastest pace of growth among the globe's 33 advanced economies, according to Treasurer Wayne Swan.
Economists said the pace of expansion vindicated the aggressive economic stimulus put in place to combat the global financial crisis, but also highlights the need for policy makers to begin swiftly pulling it out.
Swan said there is still a need for fiscal stimulus, which amounted to around $70bn during the global financial crisis, to remain in place for now, but a "staged withdrawal" of the stimulus will get under way in the fourth quarter. "The prospect of a gradual pickup in private sector activity will allow the staged withdrawal of the stimulus to proceed from the December quarter this year," Swan said in a statement.
Fuelling growth in the second quarter was a 0.8% rise in household and government consumption.
Working against growth in the quarter was a record run down in company inventories although economists said the destocking reflected an inability of firms to keep up with rising consumer demand. The inventory cycle is expected to turn up in the third quarter as companies move to meet demand, boosting growth further.
Australia's trade performance was also weaker in the second quarter as Asian steel makers negotiated hefty cuts in iron ore prices, while coal prices tumbled. But exports volumes stayed strong in the second quarter as China's economy gathered a fresh head of steam.
Economists said the basis for a solid recovery in the economy is in place and the RBA is likely to restore normality to interest rate settings over the medium term.