According to Australian Treasurer Wayne Swan, the Land Down Under “is in a league of its own.” That’s how he described his country’s economy relative to the rest of the world after the Australian Bureau of Statistics (ABS) reported Wednesday that first-quarter gross domestic product (GDP) expanded by 1.3 percent quarter over quarter, about double the 0.6 percent median forecast.

The annual GDP growth rate accelerated to 4.3 percent. The year-over-year growth rate is helped by comparison to the first quarter of 2011, which was marked by terrible weather across much of the country, but it’s still clearly a strong number.

Chalk up Mr. Swan’s ebullience to a native bias in favor of the hometown team, if you will, but on this score the facts happen to be on his side, too; it’s okay to brag if you are at the top, and Australia’s first-quarter GDP growth rate is better than any posted by any other developed market for the first quarter of 2012.

Consider:

The US, still the world’s biggest economy, posted a US 1.9 percent annualized GDP growth rate in the first quarter. Canada, Australia’s Commonwealth Cousin and No. 10 in the world in GDP terms according to the International Monetary Fund’s (IMF) ranking for 2011, matched the 1.9 percent annualized pace of the US. The Great White North grew by 0.5 percent from the fourth quarter of 2011 to the first quarter of 2012.

The Japanese government said that the Land of the Rising Sun’s GDP grew 1 percent in the first quarter, or at an annualized rate of 4.1 percent. Japan is now the third-largest economy in the world, trailing the US and China. The still developing Middle Kingdom, incidentally, grew by 8.1 percent in the first quarter, slowing from 8.9 percent the previous three months to a three-year low.

In Germany, GDP grew by 0.5 percent from the end of the fourth quarter of 2011 to the end of the first quarter of 2012, beating expectations and besting the 0.2 percent contraction from the last three months of 2011. Europe’s largest economy and the fourth-largest in the world grew by 1.7 percent during the 12 months from the first quarter of 2011 to Mar. 31, 2012.

French GDP stagnated during the first three months of the year. The UK posted a 0.3 percent GDP contraction compared to the final quarter of 2011. Italy’s economy contracted for a third straight quarter, with GDP dropping 0.8 percent from Dec. 31, 2011, to Mar. 31, 2012.

The Netherlands also recorded its third quarterly contraction in a row. France, the UK and Italy are Nos. 5, 7 and 8 in the IMF’s GDP rankings for 2011.

World No. 6 Brazil posted 0.2 percent quarter-over-quarter growth, while expansion was 0.8 percent year over year. The largest economy in South America posted its slowest growth in two years. In 2011 Brazilian GDP grew by 2.7 percent, down from 7.5 percent in 2010.

Ninth-ranked Russia posted an impressive 4.9 percent GDP growth figure for the first three months of 2012 after expanding by 4.8 percent during the final three months of 2011. The current figure is the fastest since the three months ended Sept. 30, 2011, for what is still considered a “developing” economy.

India, No. 11 in the IMF GDP rankings for 2011, expanded by 5.3 percent, but that’s its slowest rate of growth in nearly a decade. And the story of the final country to rank above Australia, Spain, is well known by now to all who venture to read Down Under Digest: The economy on that part of the Iberian Peninsula contracted by 0.4 percent during the first three months of the year.

On Tuesday, teeing up the ABS with an act that was easy to follow, the Reserve Bank of Australia (RBA), acknowledging what were then present realities and preparing for further deterioration in the global economic situation, reduced its target overnight cash rate by 25 basis points to 3.50 percent from 3.75 percent Tuesday, Jun. 5, in Sydney.

Tuesday’s move in Sydney brings to 75 basis points the RBA’s total reduction in its benchmark interest rate over the past two months. Traders, based on action in the Australian Securities Exchange (ASX) Interest Rate Swap Futures market, had anticipated a cut on the order of 50 basis points; they reacted to the more conservative cut by bidding up the Australian dollar.

The big surge came late Tuesday night on the East Coast of the United States but early morning Wednesday Down Under when the ABS confounded prognosticators with its GDP report.

The Australian dollar was worth USD0.9912 as of this writing, well off the 2012 low it established Friday, Jun. 1, at USD0.9701 and up from Monday’s close of USD0.9728. The aussie has declined from a 2012 high of USD1.0809, which it first established Feb. 7 and matched Mar. 1.

The Bank of Canada (BoC), meanwhile, opted to keep its target overnight rate at 1 percent during its Jun. 5 meeting in Ottawa. The US Federal Reserve will make its next interest rate statement Jun. 21, following the fourth of its eight regularly scheduled monetary policy meetings for 2012. The target range for the fed funds rate remains 0 to 0.25 percent.

The European Central Bank (ECB) held its overnight interest rate at 1 percent on Jun. 6.

RBA Governor Glenn Stevens’s regular post-meeting statement concluded, “The board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accomodative stance of monetary policy.”

The RBA, which meets 11 times a year (or monthly except January), will make its next decision on Jul. 3. Forecasters such as Westpac Banking Group (ASX: WBC, NYSE: WBK) Chief Economist Bill Evans are predicting the RBA’s cash rate will be as low as 2.75 percent by the end of 2012.

The blowout first-quarter GDP number is certainly a cause to celebrate–and to focus on Australia as a potential investment destination. A lot still depends on what happens from here in Europe and China. Resolving Spanish banks and Greek politics are first steps on the Continent. Middle Kingdom officials continue to introduce policies designed to boost consumption and investment without making explicit and big-dollar “stimulus” announcements.

These externalities will have a significant influence on second-quarter growth Down Under.

The Case for QE3

The yield on the 10-year US Treasury note remains near historically low levels, though it has crept up over the last couple days along with hope for a solution to the European problem. Doubts about the efficacy of another round of so-called quantitative easing–electronic money-printing–in an environment where official rates are already so low, even in the face of last Friday’s indisputably bad employment report, are high.

But in a Feb. 3, 2011, speech US Federal Reserve Chairman Ben Bernanke said the following about the first two rounds of quantitative easing:

A wide range of market indicators supports the view that the Federal Reserve’s securities purchases have been effective at easing financial conditions. For example, since August, when we announced our policy of reinvesting maturing securities and signaled we were considering more purchases, equity prices have risen significantly, volatility in the equity market has fallen, corporate bond spreads have narrowed, and inflation compensation as measured in the market for inflation-indexed securities has risen from low to more normal levels.

In other words, driving down rates is just one of several potential goods Mr. Bernanke sees in Vitamin Q. Conditions don’t appear to be as dire as they did five days ago. But conditions can change rapidly.

There is one near-certainty, however, and that is the inability or the unwillingness of US fiscal policymakers to do anything in a hot election year that would alter election calculi to one’s advantage or disadvantage.

The Roundup

Gold enjoyed its biggest single-day bounce in nearly a year last Friday, rising 3.7 percent to erase what to that point was a weekly loss. The 3 percent gain for the week ending Jun. 1 perhaps finally signals that bullion has broken its trend of trading in sync with risk assets. Weak US employment growth–only 69,000 jobs were created in May, against a consensus expectation of 150,000, and the unemployment ticked up to 8.2 percent–may have been the final straw on a pile that included rising Spanish and Italian bond yields and Greek political chaos.

These factors have receded against the rising hope for solutions, but these potential solutions haven’t cooled renewed ardor for the Midas metal.

In Greek mythology Medusa was one of the three sisters known as the Gorgons. The only mortal among the three, the once beautiful Medusa challenged the goddess Athena and was punished with hair of snakes and a visage so ugly it would turn those who gazed upon her to stone.

But this monster of the underworld’s name means “guardian” or “protectress.” It is for this that Australia-based gold producer Medusa Mining Ltd (ASX: MML, OTC: MDSMF) honors her.

We profiled Medusa, which doesn’t hedge its gold output and so provides exposure to movements in bullion, in the May 2012 In Focus feature of Australian Edge. Since then Medusa has rallied nearly 10 percent on the Australian Securities Exchange (ASX) and has generated a total return in US dollar terms of 8.3 percent. The S&P/ASX 200 Index shed more than 5 percent during this timeframe, while the S&P 500 Index surrendered 2.8 percent. Medusa produced the fifth-best total return among the 200 stocks included in Australia’s benchmark index.

Here’s the relevant excerpt from the May In Focus:

Gluskin Sheff  + Associates Chief Economist & Strategist David Rosenberg isn’t known for bombast. So when Fortune Magazine’s Economist of the Year and MSNBC’s “most accurate forecaster” for 2011 says gold will go to USD3,000 per ounce, it’s worth taking note.

Mr. Rosenberg issued his forecast via an interview with the Financial Times on May 8. He said it will happen “before this cycle is over,” as investors search for safety out of fear of another downturn along the lines of 2010 and 2011.

Gold is now down about 16.9 percent from its high near USD1,900, established in early September 2011, in the aftermath of the infamous Standard & Poor’s downgrade of US government credit from AAA.

This correction seems to have taken the yellow metal off investors’ radar screens, which means there’s an opportunity to find value before the rush for cover begins in earnest.

A major catalyst for a flight to what’s widely perceived as the best store of value on the planet would be a third round of “quantitative easing” by the US Federal Reserve. QE3 would push the volume of US dollars up and dilute the value of existing ones; this continuing devaluation of the world’s reserve currency would have a salutary effect on US manufacturing exports, for example, but will do nothing to ease worries about the long-term impact of negative interest rates. Central banks around the world continue to suppress benchmark interest rates in an effort to provide stimulus for weak economies where fiscal authorities have rendered themselves impotent. As Mr. Rosenberg notes in the FT interview, one of the key determinants of the gold price are real short-term interest rates.

If this sounds like a bearish argument on the direction of the global economy, it is at the same time a bullish argument for gold and gold-mining stocks. And the longer interest rates stay low, the longer the bull run will be.

…

The most recent edition of the Gold Mine Cost Report, a joint venture between ABN AMRO Bank NV and VM Group/Haliburton Mineral Services, found that the gold mining industry’s average cash cost of production during the first quarter of 2011 was USD620 per ounce.

This survey is based on data from 111 gold mining companies around the world.

On a year-on-year basis, the average cash cost advanced by 13 percent, continuing the double-digit year-on-year growth seen in every quarter since the third of 2009, when costs fell by 0.4 percent. Median costs of production rose by almost 4 percent, to USD583 per ounce in the first quarter of 2011.

Lower quartile production costs for the bottom 25 percent of projects surveyed fell for the first time since the first quarter of 2009, to USD435 per ounce, down 5.4 percent from the previous quarter. Upper quartile costs, meanwhile, rose to USD764 per ounce.

A big part of the rise in average production costs over the last several years is the weakening US dollar, the currency for gold pricing. Another is increasing input costs. Energy and raw material costs have all increased.

According to the June 2011 Gold Mine Cost Report’s region by region review, “the pick of the bunch” in the section covering Asia and the Commonwealth of Independent States/Europe was Medusa’s Co-O mine in the Philippines, at just USD191 per ounce.

Australia-based Medusa is focused exclusively on its operations in the Philippines, the key to its strategy to become a mid-tier, 400,000 ounce per year, low-cost gold producer.

On the latter front it still clearly continues to succeed: The company produced 18,258 ounces at a recovered grade of 8.1 grams per metric ton and cash costs of just USD239 per ounce.

This represented an improvement over the December quarter, when Medusa produced 16,270 ounces with an average grade of 8 grams per metric ton and costs of USD242 per ounce. Total gold production for the first nine months of the financial year reached 45,100 ounces.

The intriguing thing about Medusa, on top of its low-cost production profile, is that does not hedge its output. In other words, it’s able to capture the full upward momentum of the spot gold price, evidenced by the USD1,738 average price it received during the March quarter.

One of the best cash-generating gold mining companies on the planet, Medusa Mining is a buy under USD6.50.

Following are dates (confirmed, tentative or estimate) for each AE Portfolio Holding’s next earnings announcement. Where companies have reported recently we’ve included a link to our discussion and analysis of results.

Conservative Holdings

• AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY)–Aug. 22, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• APA Group (ASX: APA, OTC: APAJF)–Aug. 21, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• Australand Property Group Ltd (ASX: ALZ, OTC: AUAOF)–Jul. 26, 2012 (confirmed, CY/FY 2012 1H, end Jun. 30, 2012)
• Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY)–May 2 Down Under Digest
• Cardno Ltd (ASX: CDD, OTC: COLDF)–Aug. 16, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY)–Aug. 21, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• Envestra Ltd (ASX: ENV, OTC: EVSRF)–Aug. 27, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF)–Aug. 29, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY)–Aug. 9, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• Transurban Group (ASX: TCL, OTC: TRAUF)–Aug. 2, 2012 (confirmed, FY 2012, end Jun. 30, 2012)

Aggressive Holdings

• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–Aug. 22, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• GrainCorp Ltd (ASX: GNC, OTC: GRCLF)–May 23 Down Under Digest
• Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY)–Aug. 23, 2012 (confirmed, FY 2012 1H, end Jun. 30, 2012)
• Mineral Resources Ltd (ASX: MIN, OTC: MALRF)–Aug. 20, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY)–Aug. 13, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• New Hope Corp Ltd (ASX: NHC, OTC: NHPEF)–Sept. 20, 2012 (estimate, FY 2012, end Jul. 31, 2012)
• Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY)–Jul. 24, 2012 (confirmed, FY 2012 1H, end Jun. 30, 2012)
• Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY)–Aug. 23, 2012 (estimate, FY 2012, end Jun. 30, 2012)
• Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–Aug. 8, 2012 (confirmed, FY 2012 1H, end Jun. 30, 2012)
• WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY)–Aug. 29, 2012 (estimate, FY 2012, end Jun. 30, 2012)