SYDNEY, Dec 6 (Reuters) - Australia's economy expanded at the fastest annual pace in over a year last quarter thanks to a long-awaited jump in business investment, but worrying weakness in household spending cast a cloud over the outlook for growth.
The annual growth rate of 2.8 per cent was up smartly from a revised 1.9 per cent previously, and partly reflected the 0.4 per cent growth contraction recorded in the 2016 September quarter dropping out of the equation.
The GDP number was lower than market expectations for quarterly growth of 0.7 per cent and 3.0 per cent over the year to September, and is also below the previous quarter's revised 0.9 per cent increase.
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Australia has been exiting an unprecedented mining investment boom, with the Reserve Bank of Australia cutting interest rates to a record-low of 1.5% since November 2011 to boost growth in non-resources industries.
Treasurer Scott Morrison welcomed the acceleration in on-year growth, focusing on the jump in company spending.
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But economists say the growth figures are disappointing because the strength in private investment has masked worryingly weak household consumption.
The figures highlighted the two-track nature of Australia's recent economic growth.
Worldwide trade did not contribute to third quarter economic growth due to a decline in commodity prices, while housing investment added nothing to growth either.
Indeed, household consumption rose just 0.1 percent in the quarter, the smallest increase since late 2012.
"This is above the OECD (Organisation for Economic Co-operation and Development) average and puts Australia back up towards the top of the pack for major advanced economies around the world", he added.
Australian firms are experiencing the best trading conditions in 20 years, recording strong profits and adding full-time staff at a strong clip.
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Domestic consumption is a major concern given that consumer spending represents 60% of the economy.
Weak wages growth weighed on household budgets again, despite the declining unemployment rate.
"Consumers are indeed feeling the strain", Mr Bowen said.
Meanwhile, spending on electricity, gas and other fuels went up 11.5 per cent and cigarettes and tobacco went up 11.1 per cent.
However, household consumption was "soft" even though October's retail sales figures, released on Tuesday, showed some improvement. That view looks too optimistic, Mr. Evans said.
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