Fridges keep heat in economy

Whitegoods and lounges are replacing new mines and LNG plants as the powerhouses of the Australian economy - but not fast enough to stem a likely lift in unemployment.

In figures that put pressure on the Reserve Bank to cut interest rates again, the Australian Bureau of Statistics said the economy grew 0.5 per cent through the final three months of last year.

Over the full 12 months, the economy grew 2.5 per cent, though much of that was in a short burst early in the year. The economy grew at an annual rate of just 1.8 per cent through the final six months of last year.

With the economy needing to grow above 3 per cent for unemployment to stabilise and fall, experts believe the jobless rate - already at a 12-year high - could climb further.

As expected, overall growth is being held back by the fall in mining construction.

The Government and the Reserve hope non-mining parts of the economy lift.

The figures show a further rise in housing construction that has fed into a solid increase in household consumption, including durable goods.

These include fridges, freezers, ovens and carpets needed to furnish the record number of units and houses being built.

There was some much-needed positive news about the WA economy in the figures, with State final demand lifting 2.1 per cent through the quarter.

It was much like the rest of the country, with a lift in household spending and consumption adding to growth. Despite the quarterly improvement, State economic activity went backwards 1.7 per cent last year. Federal Treasurer Joe Hockey said the figures were solid and that Australia was growing faster than some major trading partners.

Pressed on unemployment, Mr Hockey said the lower Australian dollar and falling petrol prices - coupled with interest rate settings - meant there was already plenty of stimulus in the economy helping households.

"There is a good story, and there is a great story coming," he said. "We just have to grasp the nettle."

But Reserve Bank board member John Edwards told Dow Jones the current growth rate would lift unemployment.

"There is no doubt at this rate of 2.5 per cent, it is below the rate that is necessary to prevent a rise in unemployment," he said.

HSBC chief economist Paul Bloxham said low interest rates and the recent fall in petrol prices should continue to underpin household spending.

But there were threats to that spending, starting with the next Federal Budget.

Shadow treasurer Chris Bowen said confidence was 10 per cent lower than when the Government was elected.