Australia's economic expansion slowed sharply in the first quarter as sluggish exports and a cooling housing market put a brake on the rampant growth seen in the latter half of 2003.
First-quarter gross domestic product rose just 0.2 percent, less than expectations and well down on a revised 1.3 percent gain in the final quarter of last year, data showed on Wednesday. GDP was 3.2 percent higher than a year before.
The data endorsed the central bank's decision earlier on Wednesday to leave overnight interest rates at 5.25 percent for a sixth consecutive month.
Economists are increasingly convinced that interest rates are near a peak, because of signs of slowdowns in credit and housing prices, whose strength has worried the central bank.
"Consumer demand is not advancing at the same pace this year as it did in the second half of 2003," Reserve Bank Deputy Governor Glenn Stevens told a business lunch in Brisbane. "There has been a distinct softening in most of the major housing markets. This is a welcome development".
"It is hard to imagine a much more benign backdrop for the aftermath of an asset and credit boom," he said.
A Reuters poll had forecast a 0.5 percent rise in GDP from the previous quarter and 3.6 percent from a year earlier.
"Clearly, the higher interest rates of last year, coupled with a softening in the housing market are seeing domestic demand ease and we'd expect that trend to continue as the year unfolds," said Su-Lin Ong, senior economist at RBC Capital Markets.
The data showed the economy had lost 1.3 percentage points of growth in the first quarter because of a poor trade performance, reflecting the strength of the Australian dollar.
The statistics bureau said the property and construction industries had also pulled down economic growth.
The Australian dollar slid to 70.40 US cents on the data release from 70.70 just before, while September futures on 90-day bank bills rose to 94.48 from 94.44, showing a smaller chance of an interest rate rise because of the weak data.
Business investment and retail spending also slowed in the quarter, while Australia's housing market has come off the boil after twin interest rate rises in November and December.