The Australian economy continues its growth story with the latest ABS figures for economic growth showing how the economy continues to defy more pessimistic forecasts.

According to the Housing Industry Association , the voice of Australia’s residential building industry, the economy grew by 0.5 per cent during the June 2014 quarter, 3.1 per cent higher than the corresponding quarter in 2013. The volatile inventories component was the single largest contributor to this growth with stock accumulation by firms adding significantly to the growth figure. However, international trade sliced a considerable chunk off the economic growth rate.

HIA Senior Economist, Shane Garrett observes that the latest ABS figures showing growth continuing at a reasonable rate is a positive in itself. However, growth during the quarter was well below trend, which does not auger particularly well for the labour market outlook. The volatility of inventories ensures this component of economic growth cannot be relied upon the next time round.

Though new home building displayed a strong performance for the second consecutive quarter, the sharp fall-off in the volume of renovations was worrisome.

Though international trade had helped boost growth in previous quarters, Shane Garrett noted that the combination of a stronger dollar and lower commodities prices in this quarter actually resulted in net overseas demand hurting growth.

However, the latest ABS figures are unlikely to prompt any change in the RBA’s strategy of low and stable interest rates.

New dwelling activity increased by a robust 5.2 per cent during the June 2014 quarter, with renovations activity posting a significant 3.4 per cent decline on the previous quarter. Total dwelling investment thus increased at a 2.3 per cent rate. Compared to twelve months earlier, new dwelling activity was 14.6 per cent higher and renovations activity dipped by 0.7 per cent in the June quarter.