Australia's resource-rich economy grew at a pedestrian 0.4 percent last quarter as business spending slipped from record highs, knocking the local dollar lower and keeping alive the chance of further cuts in interest rates. The quarterly rise in gross domestic product (GDP) was half that expected by analysts, though much of the miss was caused by a sharp drop in farm inventories as grains stocks were exported.
The value of all goods and services produced was put at an inflation-adjusted A$337 billion ($354 billion), for annual growth of 2.3 percent. That was much nearer forecasts thanks to upward revisions to GDP for early 2011. The soft headline result lopped half a cent off the Australian dollar, already under pressure from concerns about the global economy and the euro zone debt crisis.
"It still leaves growth running at just over 2 percent, so we're doing much better than most, but it's clearly a bit of a disappointment," said Stephen Walters, chief economist at J.P. Morgan. "It does suggest there's some weakness elsewhere in the economy, that's for sure." The result was a blow to the optimism of the Reserve Bank of Australia (RBA), which chose to keep interest rates steady at 4.25 percent this week in anticipation of better growth.
Official jobs figures are due on Thursday and are expected to show the unemployment rate ticked up to a still low 5.2 percent in February. Analysts suspect it would take a rise to 5.5 percent or higher to prompt a further rate cut to 4.0 percent. Futures markets presently imply around a 38 percent probability of a cut in April, rising to 80 percent in May and almost 100 percent by June.
Indeed, Australia's annual growth of 2.3 percent in 2011 handily outpaced the euro zone's 0.7 percent, Britain's 0.5 percent and 1.7 percent in the United States. Output for the whole year reached a real A$1.34 trillion, or A$58,925 for each of Australia's 22.8 million people. That compared to per capita GDP in the United States of $42,916.