Mining sector still driving growth

COMPANY profits have risen for the fourth consecutive quarter, with mining and resources still playing a big part in driving economic growth, but other sectors are still dragging their feet.

Company gross operating profits rose 1.7 per cent in the December quarter, official figures show, mostly in line with market forecasts of a two per cent rise.

JP Morgan economist Tom Kennedy said the result means that Wednesday's December quarter gross domestic product (GDP) figures will be quite solid.

"When you look at the profits data it is still quite reliant on the resource sector," he said.

"The rebalancing of growth to the other sectors is still playing out very slowly and we're not quite there yet."

Mr Kennedy said even as mining and resources investment peaks and then falls, exports from those new project that have been built are becoming the big driver for economic growth.

"You've got other sectors out which aren't turning a profit and losing money," he said.

In the year to December, gross operating profits in current prices and seasonally adjusted terms were up 10.7 per cent, the Australian Bureau of Statistics (ABS) said on Monday.

St George senior economist Jo Horton said Australia is starting to reap the rewards of a decade surge in spending on the mining and resources sector.

"The mining investment boom has laid the foundations for increased production capacity and we are seeing the results in higher production volumes and increased mining profits," she said.

"Mining profits accounted for 34.3 per cent of total company profits in the December quarter and 32.2 per cent of profits over the year to the December quarter."

Ms Horton said other sectors, in particular manufacturing, continue to weaken.

"The largest detractor from the growth in company profits was the manufacturing sector, where profits fell 14.6 per cent in the December quarter," she said.

"This reflects anecdotal evidence and other data which suggests manufacturers margins are being squeezed by rising costs, despite the weaker Aussie dollar over 2013."

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