Australian consumers spend more and save less

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Australian consumers are spending more and saving less which has helped the economy grow by a stronger than expected rate in the last three months of 2013 and with growth at a seasonally adjusted 0.8% taking the annual growth rate to 2.8%

Household consumption improved slightly for the period to a seasonally adjusted 0.8% while government spending lifted by 0.3% and at the same time, the household savings ratio slipped from its almost decade-highs to 9.7%.

The fourth-quarter growth was driven by a 0.6% boost from net exports and a 0.5% contribution from consumption. A 0.3% fall in investment offset some of the gains.

The quarterly figures were up from a 0.6% expansion in the three months to September.

The Australian dollar jumped nearly half a cent on the back of the stronger-than-expected figures to trade as high as US89.97 cents, and is almost at the same level today.

The mining, manufacturing, rental, hiring and property sectors contributed 0.1% to GDP, while the terms of trade, a ratio that measures export prices to import prices rose by 0.6%

Economists had tipped the growth rate for the quarter to come in at 0.6% and for the year-on-year rate to be 2.5%

Data released on Tuesday showed that net exports were expected to contribute 0.6% of growth to fourth-quarter GDP.

At the same time, business investment intentions projections for the 2014-15 reaffirmed expectations of a fall-off in mining firms' spending plans but pointed to a soft outlook for investment by non-resources companies.

Meanwhile, other partial GDP indicators showed reasonably strong growth in businesses' wages and profits, and economists have said resources exports were expected to drive GDP growth.

The property industry is expected to pick up over the coming two years with investment in a variety of sectors including Housing and Apartment sales which are expected to pick up where mining drops off.