Australian economy grows at half the expected pace

Wednesday 16th December 2009

Australia’s economy expanded at half the forecast pace in the third quarter and Reserve Bank Deputy Governor Ric Battellino hinted that the central bank may pause in the pace of interest rate hikes. The Australian dollar fell.

Australian gross domestic product grew 0.2% in the three months ended September 30, according to the Australian Bureau of Statistics. That’s below the 0.4% pace forecast by economists. A drop in net exports partly offset a 0.7% increase in household spending and a 6.2% gain in public investment, the figures showed.

Separately, Battellino said monetary policy is “back in the normal range” as business and home loan rates have increased at a faster clip than the RBA has hiked the overnight cash rate target. The comments prompted traders to cut bets on a fourth increase in the benchmark rate any time soon, after the central bank’s three increases in as many months. The Australian dollar fell to 90.02 U.S. cents from as much as 90.66 cents before the GDP data and central bank comments were released.

Third-quarter GDP was “softer than expected,” economists at Westpac Banking Corp. said. Still, “the Australian economy has proved to be resilient in 2009, given the weakness of the global economy and the associated global credit crisis,” they said.

“The outlook for the Australian economy is very positive. We expect domestic demand growth to accelerate on the housing construction upswing and burst of public investment.”

The fall in net exports in the third quarter reflected a 2.3% decline in exports and a 5.8% rise in imports.

Businesswire.co.nz

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