Australia economic growth appears stronger

SYDNEY (AFP) — Australia may post stronger-than-expected economic growth for the financial year to June, Treasurer Wayne Swan said Thursday, after boosted exports helped the nation dodge a technical recession.

But the minister warned that even if the economy exceeds the forecast of flat growth made by the government last month, unemployment would continue to rise.

"(The gross domestic product figure released on Wednesday) will definitely mean there is probably more positive growth or upside risk in the forecasts, but it doesn't change the nature of the challenge," Swan told Sky News.

Reserve Bank of Australia (RBA) governor Glenn Stevens said the central bank was ready to further cut interest rates to encourage a "durable upswing" but also warned that unemployment could weigh on the economy.

The RBA has slashed rates from 7.25 percent in September to a 49-year low of 3.0 percent, although it declined to make further changes at its meeting this week.

"While consumer spending has held up quite well so far, it may be weaker over the next few months, as the one-off government payments pass and rising unemployment starts to weigh on incomes and willingness to spend," Stevens said.

"Our expectation remains that the economy will be well placed for expansion towards the end of this year," he added.

The government estimated in its May budget that GDP growth for 2008-09 would be flat while the economy would contract by 0.5 percent in the 2009-10 financial year.

But Australia on Wednesday became the only major Western nation to avoid recession during the global economic slump when it posted surprise growth in the first quarter of 2009.

The announcement that the economy had grown 0.4 percent in the three months to March instead of shrinking for a second consecutive quarter came a day after the government unveiled better-than-expected export figures for the period.

However, joblessness still looms large on the economic horizon, with a government prediction of 8.5 percent of unemployment by the middle of 2010 expected to stand, Swan said.

"There's still a very big employment challenge out there," Swan said, adding there was no plan to revise the jobless forecasts.