Further, the strong September performance was the best quarterly growth rate in five years, according to Commsec chief economist Craig James.
The Australian dollar rose as much as 0.1 per cent immediately after the release by the Australia Bureau of Statistics, but quickly pulled back to be 0.1 per cent lower at $0.7652.
The economy shrunk by 1.3% in the fourth quarter alone, the figures showed.
That makes a mockery of assertions that the economy was heading for recession (after the September quarter's contraction) and claims as late as yesterday on ABC morning TV that the economy had not made the transition from the mining boom and remained too reliant on mining.
"The surge in February builds on a recovery from the sluggish performance in the third quarter of previous year and marks a fifth month of expansion", said Australian Industry Group chief executive Innes Willox.
National Australia Bank economics director David de Garis said the drop in exports was driven by a $671 million, or 39 per cent, slump in gold exports.
Wednesday's data show household consumption contributed 0.5 percentage points to GDP growth, with net exports contributing 0.2 percentage points.
However, the nation sprang to a record trade surplus of $3.5 billion in December on a massive rebound in commodity prices and an increase in the volume of resources being exported.
Global Research, Standard Chartered bank, London, said that while the analysts were expecting a full year contraction (the actual print of -1.5% y/y is marginally better than our expectation of -1.7% y/y), it's the detail that makes for the more important reading. Public capital formation added 0.3 percentage point.
He said in the mid-year economic and fiscal outlook Treasury projected 2.75% growth in 2017-18.
The manufacturing sector grew on a quarter-on-quarter basis by 1.89 per cent but declined over the year by 4.32 per cent reflecting the problems that the sector faced during the year, due to a combination of factors.
The metal ores sub-sector grew by 7.03 per cent in Q4 of 2016 as compared to 6.93 per cent in the last quarter of 2015, thus justifying the priority that the federal government continues to give to solid minerals.
"The Australian economy is performing well but, on the domestic front, weak wage growth is crimping household demand", she said.