The Australian economy unexpectedly grew in the first quarter of the year as it avoided the global recession.

Officials in Sydney said output rose 0.4% in the three months to the end of March, having contracted 0.6% in the final quarter last year.

Australia thus avoided slipping into the recession - defined as two consecutive quarters of decline - which has swamped other major economies such as the US, the UK, the eurozone and Japan.

"Rumours of the Australian economy's death have been highly exaggerated," said Craig James, chief equities economist at Commonwealth Bank of Australia. But Prime Minister Kevin Rudd warned: "We're not out of the woods yet."

News of Australia's success came as the Bank of Japan said its economy could be past the worst.

Policymaker Hidetoshi Kamezaki said: "Japan's economy continues to worsen. But we are past a situation where the economy was going down a steep hill.

"We expect a recovery before long But there is a chance of Japan's economy deteriorating again if recoveries in overseas economies are weak."