Australian Economy Growth Slowest In Seven Quarters

Australia’s economic growth has slowed to the weakest annual pace in seven quarters as inventories fell, equipment and machinery investment slid and resources exploration dropped the most in nine years.

The Australian Bureau of Statistics said on Wednesday that gross domestic product rose 0.6 per cent in the first quarter from the December quarter, when it gained by a similar amount.

Annual GDP gross domestic product growth cooled to a below-average 2.5 per cent, from 3.2 per cent witnessed in the December quarter, this is the smallest gain since the June quarter of 2011.

Wednesday’s figures fell short of economists’ expectations for a rise of 0.7 per cent in the quarter and 2.7 per cent over the year.

Now we are witnessing the Australian Dollar fall on release of this data.

The Australian dollar has fallen a quarter of a US cent, to US96.13¢ from US 96.38¢, just after this data was released.

The figures will add to the growing concerns that the Australian resources investment boom has peaked, with minerals and petroleum exploration slumping 11.2 per cent, the biggest quarterly drop since the 2004 March quarter.

Engineering construction – which is dominated by the resources sector – slid 5.7 per cent, the first drop since early 2010, when the economy rocketed out of the global financial crisis thanks to the China boom.

The figures support industry and government surveys showing the resources boom has probably peaked and prompted the Reserve Bank of Australia to cut official interest rates to a record low 2.75 per cent last month.

Boosted by trade

The national accounts suggest the economy was supported in the three months through to March 31 by a 2.7 per cent rise in the terms of trade – a measure of export earnings.

The increase was the first in 1½ years and helped push nominal GDP growth to 1.3 per cent last quarter, adding to company profits and federal government revenue collections.

“What we see from these figures is we have broken the back of weak productivity growth,” Treasurer Wayne Swan told reporters in Canberra on Wednesday.

“New business investment is still around 50-year highs as a per cent of GDP.

‘There’s still patchiness’

“There’s still patchiness in parts of the economy – this transition was never going to be seamless.

“When you look at today’s national accounts they are a reminder of what Australia has achieved – and we can face the future with confidence.

“We have a transitional economy and the high dollar makes that transition harder.”