Australia growth edges up slightly in second quarter

Brendon Thorne | Bloomberg | Getty Images

Australia's economic growth edged up slightly in the second quarter, with gross domestic product rising (GDP) 2.6 percent year on year.

The GDP reading came in a touch above consensus expectations for 2.5 percent, and follows 2.5 percent growth in the March quarter. On a quarterly basis, the economy expanded 0.6 percent.

The country's central bank has cut interest rates twice this year to 2.5 percent in an effort to bolster growth.

The Australian dollar reacted positively to the data, rising 0.2 percent against the U.S. dollar to trade around the 0.908 level.

However, economists say the data provides little reason to cheer.

"It's still panting a picture of subdued growth, 0.6 percent is the average rate for the last five quarters. It may be okay by U.S., Europe or Japan's standards, but for Australia, it's below the level to stop unemployment rising," said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

He says the economy requires growth of 3 to 3.25 percent to ensure stable employment conditions.

"The good news is the economy is not isn't collapsing, it's still motoring along. But it's doing so at a subdued pace," he said.

As a result, Oliver says he is not ruling out further rate cuts by the Reserve Bank of Australia.

"if the Australian dollar does not fall further and data remains weak, the central bank will likely cut rates again in November by 25 basis points."

The data comes ahead of the closely-watched federal elections this Sunday, which will likely see the incumbent Labor government led by Prime Minister Kevin Rudd lose to the conservative opposition party led by Tony Abbott.