#australiangdp

2 December 2014

THE Australian economy is picking up a bit of pace as cheaper petrol and low interest rates encourage more spending.

THE economy is forecast to have grown by 0.7 per cent in the September quarter, and 3.1 per cent in the 12 months to September, according to an AAP survey of 15 economists.

In the June quarter, gross domestic product (GDP) grew at 0.5 per cent, for an annual rate of 3.1 per cent, seasonally adjusted.

The Australian Bureau of Statistics will release the latest National Accounts figures on Wednesday.

Commonwealth Bank senior economist Michael Workman said retail spending is boosting economic growth but added that weak growth in wages and salaries could threaten a continued rise in consumer spending.

"Household consumption growth is being supported by low interest rates, higher dwelling prices and cheaper petrol," he said.

Mr Workman said housing construction was also driving the economy and the extra supply of homes would put a lid on price rises.

"More residential construction and firmer consumer spending will help absorb job losses from the mining capital expenditure downturn," he said.

"Extra housing supply will flatten house price growth through 2015, raise affordability and, with the usual population growth, prolong the construction cycle."

A report from RP Data, released on Monday, showed that price rises are already slowing.

House prices across the eight capital cities fell by 0.3 per cent in November, and were up by 8.5 per cent over the past 12 months, the slowest growth in a year.

ANZ is forecasting 0.7 per cent growth in the September quarter but has downgraded its forecasts for 2015 and 2016.

Senior economist Felicity Emmett said prices for Australia's main exports - iron ore and coal - will continue to fall in the new year and weigh on the economy.

"Overall, growth remains below trend - where it is likely to stay for most of next year given the headwinds the economy is currently facing," she said.

"We now expect below-trend growth to continue well into 2016 as a result."

However, Ms Emmett said, the good news was that housing investment remained strong and would boost retail spending in the new year as people fit out their homes.

"Dwelling investment is forecast to have posted a 1.5 per cent fall in in the third quarter, after three quarters of solid gains," she said.

"Despite this, we continue to look for residential investment to grow solidly over the next year."

ECONOMY TO PICK UP PACE IN THE SEPT QUARTER

* Sept quarter growth forecasts range from 0.5 pct to 0.9 pct

* Median forecast is 0.7 pct

* Annual rate of growth is forecast to be 3.1 pct

(Source: AAP survey of 15 economists)