Chinese demand for commodities drives Australia growth

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The Independent Online

Australia's economy rocketed to 4.3 per cent growth for the year through March, its fastest expansion since the global financial crisis, as Chinese demand for iron ore and other commodities masked difficulties outside the mining industry.

The Australian Bureau of Statistics said yesterday that the economy grew 1.3 per cent in the January-March quarter from the previous three months, which was double what economists had expected.

A major driver was a 19.7 per cent surge in engineering construction, mainly in mining.

Planned investment in the country's resources sector reached A$500bn (£319bn)

Increased spending by households also made a significant contribution to growth. But manufacturing continued to contract as the mining boom drives up the Australian dollar, making the country's manufactured exports less competitive.

The January-March growth figures predate the latest deterioration in Europe's debt crisis but could still make Australia's central bank less willing to cut interest rates aggressively.

On Tuesday, the central bank cut its benchmark rate for a second consecutive month, to 3.5 per cent.