Q1 GDP rises 0.8 vs 0.5 forecast, up 3.3 yy
Strong domestic demand tempered by import surge
High savings to support spending as rates rise

SYDNEY, June 1 Reuters Australia39;s economy held up better than expected in the first quarter as strong domestic demand offset the drag from dismal weather and a flood of imports, setting the scene for more inflationfighting hikes in interest rates.

Data from the Australian Bureau of Statistics out on Wednesday showed gross domestic product GDP rose 0.8 in the March quarter from the previous quarter, topping market forecasts of a 0.5 gain.

Annual growth ticked down to a stillsolid 3.3, after a barnstorming 4.4 in the December quarter, and most analysts expect that to accelerate again as cashedup consumers seem happy to keep spending.

It supports our view that the economy will hold up better in the face of rising interest rates and falling real incomes than most anticipate, said Marcel Thieliant, a senior economist at Capital Economics.

With the drag from net trade reversing and the reopening of the economy driving another marked rise in consumption, we have penciled in a stronger 1.5 qq rise in Q2 GDP.

Household consumption alone had added 0.8 percentage points to growth in the first quarter, while government spending and inventories also made sizeable contributions. A chunk of that demand was met by imports, taking 1.5 percentage points off GDP.

Consumers still have money to spend with the household savings ratio dipping…