SYDNEY, June 5 (Xinhua) -- Australia has posted strong company profit results for the first quarter of 2017, with gross profits rising by 6 percent, according to data released by the Australian Bureau of Statistics (ABS).
The 6-percent increase outperformed the market expectations of 5 percent, senior economist at the Commonwealth Bank Michael Workman said in a statement on Monday that over the year, company profits are up by 40 percent.
Workman pointed to the strong data coming out of the mining sector as a driver for the gains, and said this was indicated by the 13 percent gain achieved, whilst non-mining profits rose by 2.4 percent for the quarter.
"Profits growth was strongest in the mining sector, rising by 13 percent in the first quarter. Buoyant results for the previous quarters mean that mining profits are up by an astonishing 113 percent over the year," Workman said.
"Consequently, we expect to see higher spending by the mining groups on new equipment and maintenance over the next few quarters."
The economist did however contend that the "missing ingredient" in Australia's growth mix was increased investment in non-mining business operations, as the nation contends with shifting from mining to non-mining led growth.
Kate Hickie, economist at Capital Economics said that there is a growing concern that the "household sector has begun to falter," and cited the weakness in the income growth figures as an indicator that the situation was likely to improve in the short to medium term.
"We expect that consumption growth will slow from 2.7 percent last year to 2.0 percent this year, and with household debt at a record high and growing signs of a slowing housing market, the risks lie to the downside," Hickie said.
Rising mortgage payments are also set to hit homeowners hip pockets, according to Hickie, who believes that the "record high" level of debt in Australian households has led to uncertainty in terms of consumption growth.
"With income growth set to remain subdued and households' budgets facing additional headwinds from higher mortgage rates, consumption won't quite be the powerhouse of growth over the next couple of years we've all become accustomed to," Hickie said.
Australia's Reserve Bank will meet on Tuesday to decide the cash rate, while first quarter GDP figures for the year are set to be released on Wednesday.
