Australia's economy proved to be stronger than expected in the second quarter, recovering from the devastating floods that disrupted coal and agricultural production earlier this year.

Latest ABS figures show that GDP, in seasonally adjusted volume terms, grew 1.2 per cent in the June quarter of 2011, after a revised fall of 0.9 per cent in the March quarter. Growth for the 2010-11 financial year is 1.8 per cent.

CommSec economist Savanth Sebastian said this was a healthy result.

"It effectively wipes out all the losses in the March quarter, due to the flood-induced natural disasters," Sebastian said.

The growth for the quarter was driven by a 0.8 per cent contribution to growth from changes in inventories and a 0.7 per cent contribution from final consumption expenditure. These increases were partially offset by a -0.5 per cent contribution from net exports.

Treasurer Wayne Swan, releasing the data, dismissed concerns for the country's economic outlook.

"Today's figures don't just confirm that the economy has bounced back strongly from those events but they also show there are broader signs of underlying strength in the economy," he said.

On the back of this GDP growth and a 5.4 per cent increase in the terms of trade, real gross domestic income grew 2.6 per cent for the quarter. The terms of trade has more than doubled over the past decade, rising from an index number of 60.5 in the June quarter 2001 to 122.6 in June quarter 2011. Real gross domestic income grew 6.5 per cent in the 2010-11 financial year, the largest growth since 1987-88.