By Ian Chua
SYDNEY, June 1 (Reuters) - Australia's economic growth boomed past expectations in the first quarter with the annual pace speeding to its fastest in three years, a result that could keep the central bank on hold at its policy meeting next week.
Wednesday's data from the Bureau of Statistics showed gross domestic product (GDP) grew 1.1 percent in the three months to March, from the previous quarter when it rose an upwardly revised 0.7 percent.
That saw annual growth step up to 3.1 percent, from a downwardly revised 2.9 percent, keeping the economy well on track to meet the Reserve Bank of Australia's (RBA) forecast of 2.5-3.5 percent by June.
The Australian dollar shot up nearly half a U.S. cent after the data showed the nation's economic growth beat expectations, reducing the need for interest rate cuts.
"All of the growth in the economy is coming from trade as the third phase of the mining boom kicks in as projects start exporting," said Shane Oliver, chief economist, AMP Capital Investors.
"We have had the mining investment boom that's come to an end. Now we are seeing the boom in mining and resource-related exports, that's what is driving this growth."
Australia is still outpacing other rich nations including the United States, which last week reported annualised growth of 0.8 percent in the first quarter.
The upbeat outcome beat expectations by most analysts, even after many of them upgraded their expectations on Tuesday after data showed net exports contributed a much larger-than-expected 1.1 percentage points to first quarter growth. Market consensus was for a 0.8 percent GDP increase on-quarter and an on-year rise of 2.8 per cent.
The RBA reduced its cash rate to a record low 1.75 percent last month due to alarmingly low inflation but investors are giving a less than one-in-ten chance of a follow up cut next Tuesday.
An improving economic background should provide a political boost to the coalition government of Malcolm Turnbull, who faces a national election next month.
(Additional reporting by Swati Pandey and Cecile Lefort; Editing by Sam Holmes)