Canberra  - Government handouts and mineral exports to China have kept Australia out of recession, officials in Canberra said Wednesday.

The economy grew 0.6 per cent in the June quarter, making it the only advanced economy not to experience contraction this year.

"I think Australians everywhere can be proud of this achievement in the worst global conditions in over 75 years," Treasurer Wayne Swan said. "When every other major advanced economy fell into technical recession, we did not."

While he claimed billions in cash handouts to households saved the day, opposition Liberal Party treasury spokesman Joe Hockey said the stimulus packages only stored up trouble for the future.

Arguing that the handouts showed that "if you throw enough money at a problem some of it will stick," Hockey warned of heavy government borrowing driving up interest rates from the current 49-year low of 3 per cent.

When Labour came to power 18 months ago, it inherited no debt and a surplus of 22 billion Australian dollars (16 billion US dollars).

Stimulus packages costing 42 billion Australian dollars have taken the budget deeply into deficit and generated fears of not just higher interest rates but higher taxes as well. (dpa)