Australia's economy expanded more than expected in the second quarter, data showed Wednesday, easing concerns that the country could suffer a double-dip recession as it battles a fresh wave of Covid infections thanks to a pick-up in domestic demand.

However, there are fears it will suffer a contraction in the current period with the two biggest cities stuck in lockdown with authorities struggling to contain the latest outbreak.

The Australian Bureau of Statistics reported the economy grew 0.7 percent in April-June as household spending and government expenditure jumped.

Compared with the same period last year the economy soared 9.6 percent owing to the very low base of comparison.

While Australia's economy grew in the second quarter, lockdowns in Sydney and Melbourne have fuelled concerns of a contraction in the next three months
While Australia's economy grew in the second quarter, lockdowns in Sydney and Melbourne have fuelled concerns of a contraction in the next three months AFP / PETER PARKS

"Domestic demand drove growth of 0.7 percent this quarter which saw continued growth across household spending, private investment and public sector expenditure," said the bureau's national accounts head Michael Smedes.

But the figures did not include the full impact of prolonged lockdowns in Sydney and Melbourne as well as other parts of the country that have more than half the 25 million population living under stay-at-home orders.

Australia suffered its first recession in nearly three decades last year, but recovered strongly towards the end as outbreaks were brought under control and virus curbs lifted.

Authorities have now agreed on a roadmap to reopen the country when it hits vaccination targets of 70 and 80 percent -- likely later this year -- which would boost the economy once more.

But disagreement between state government leaders over the approach could yet derail those efforts, with concerns some could block the nationwide removal of restrictions.

Coronavirus