Forecasts were for quarterly growth of around 0.8%.
On an annual basis the economy expanded 3.1% in the three months to March.
Service-based industries also contributed to the first quarter growth, along with finance and retail trade industries.
The economy has been struggling for growth since the mining boom tapered off, mainly due to slowdown in demand from one of its largest trading partner, China.
The Australian dollar shot up by nearly half a US cent following the Gross Domestic Product (GDP) data, which took many by surprise.
Economists say the latest growth figures should reduce the need for further interest rate cuts.
Last month, the country's central bank - the Reserve Bank of Australia (RBA) - cut its benchmark interest rate to a historic low of 1.75%. The RBA cited lower-than-expected inflationary pressures for the reduction from the previous rate of 2%.
Australians will go to the polls on 2 July after one of the longest election campaigns in the country's history.
Prime Minister Malcolm Turnbull has called the election several months early after the country's upper house repeatedly blocked legislation.