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Gloating the growth. -

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Australia has bucked the international trend to achieve growth in the June quarter. The result has
pleased economists and delighted the Federal Government, which claims credit for its multi-billion
dollar stimulus effort. But the downside for consumers will come when the Reserve Bank lifts
interest rates to keep the growing economy in check.

Transcript

LEIGH SALES, PRESENTER: Australia has bucked the international trend to achieve growth in a time of
global recession.

The national accounts for the June quarter have revealed an economy increasing in size and bouncing
back from the world financial crisis.

The result has pleased economists and delighted the Government which claims credit for its
multibillion-dollar stimulus effort.

But the downside for consumers will come if the Reserve Bank lifts interest rates to keep the
growing economy in check.

From Canberra, Hayden Cooper reports.

HAYDEN COOPER, REPORTER: This is what stimulus money buys - new houses and workers to build them.

BUILDER: Obviously it's pumped up business around here. We've got 10 to do here where we are, so
every little bit helps.

HAYDEN COOPER: And this is a happy Treasurer.

WAYNE SWAN, TREASURER: Well good morning or good afternoon.

HAYDEN COOPER: One who says his stimulus plan has saved the nation.

WAYNE SWAN: Today's national accounts show how the stimulus is helping Australia defy global
economic gravity.

HAYDEN COOPER: June quarter growth came out stronger than most had expected at 0.6 per cent. The
annual figure is the same. It outshines the rest of the world, leaving the US, the UK and Japan
well behind.

CHRIS RICHARDSON, ACCESS ECONOMICS: Look, a pretty solid result and you compare us to what's around
the world at the moment, it is absolutely daylight set in. Australia is doing very, very well.

HAYDEN COOPER: State by state, Victoria did the best, registering 3 per cent growth, South
Australia, the West and NSW followed. Tasmania was stagnant and Queensland, the Northern Territory
and the ACT provided the red ink.

But Kevin Rudd's firmly focused on the national picture, and the open argument about what might
have been had the stimulus not been spent .

KEVIN RUDD, PRIME MINISTER: The Australian economy would, right now, have been in the deepest of
recessions, and unemployment would have been going through the roof.

JOE HOCKEY, SHADOW TREASURER: And of course if you throw enough money at a problem, some of it will
stick. And it's good, it's good for Australia. It is fantastic for Australia that we are showing
good economic growth today, we welcome the news. But now Mr Rudd has to pull back on the spending.

HAYDEN COOPER: Seasoned economic watchers like Chris Richardson agree it's an impressive result.
But unlike others in his field he doesn't believe it's toast-worthy.

CHRIS RICHARDSON: It's not a champagne economy, you should not open that bottle yet. Things are
getting better but I'm not expecting much growth next quarter or the one after that. Things in
Australia are still fragile.

HAYDEN COOPER: But a consumer-led quarter of growth might now give the Reserve Bank all it needs to
start a series of interest rate hikes.

CHRIS RICHARDSON: The point is that in the next 18 months interest rates in Australia will go up 2
per cent, maybe 2.5 per cent, they are at emergency lows, they won't stay there.

HAYDEN COOPER: Some commercial banks might even jump before the Reserve does although the
Treasurer's warning them not to.

WAYNE SWAN: They'd want to have a very, very good reason.

HAYDEN COOPER: As the Government itself admits, the road ahead still has its challenges. There's no
sign that economic stimulus, now shifting to construction projects, will be wound back. In fact if
the Treasurer has any regrets, it's that he spent too little, not too much.

Wayne Swan is still ruing the one that got away: the quarter of negative growth at the end of last
year.

WAYNE SWAN: If we could have had more stimulus in December then maybe then that figure wouldn't
have moved the way it did.

HAYDEN COOPER: So don't suggest he went overboard.

WAYNE SWAN: Well look at the numbers.

HAYDEN COOPER: His proudest for some time.

Hayden Cooper, Lateline.