News Room - Business/Economics

Posted on 03 Sep 2008

Economy in slowdown mode (Australia)

AUSTRALIA'S economic growth has eased to its slowest pace in nearly four years, justifying yesterday's interest rate cut by the Reserve Bank.

The June quarter national accounts show gross domestic product (GDP) growth rose to just 0.3 per cent after an upwardly-revised 0.7 per cent increase in the previous quarter, the Australian Bureau of Statistics said.

Annual GDP is now running at 2.7 per cent compared with 3.6 per cent in the year to March, prior to revisions.

Household consumption contracted 0.1 per cent in the quarter.

Economists had forecast June quarter GDP to rise 0.4 per cent based on weak consumer spending and housing investment, and still relatively soft exports, offset by continued strong business investment.

The Reserve Bank cut its key cash rate by a quarter percentage point yesterday to 7.0 per cent on evidence that the economy is slowing sufficiently to curb inflation pressures over time.

Financial markets are betting on at least one more rate cut before the end of the year.