Gross domestic product fell 0.5 percent from the third quarter, when it increased 0.1 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for 0.2 percent growth. The nation’s currency dropped.
Waning consumer and business spending, falling house prices and a slump in construction have pushed Australia close to its first recession in two decades and prompted the central bank to slash borrowing costs by four percentage points since September to a 45-year low. Governor Glenn Stevens yesterday kept the benchmark interest rate at 3.25 percent, saying A$88 billion ($56 billion) in government spending will stoke growth this year.
The economy grew 0.3 percent from a year earlier to complete 17 years of expansion.
Housing investment fell 1.2 percent, detracting 0.1 percentage points from growth in the quarter. Exports dropped 0.8 percent, detracting 0.2 percentage points from GDP. A rundown in inventories detracted 1.4 percentage points. Consumer spending made no contribution to growth.
Growth may contract in coming quarters as a deepening global recession erodes demand for Australian exports.
Commodity exports from Australia, the world’s biggest shipper of iron ore, coal and wool, are forecast to decline in fiscal 2010 for the first time in six years, the Australian Bureau of Agricultural and Resource Economics said yesterday.
A separate report published by the group today showed demand for services shrank last month. Company profits fell in the fourth quarter by 6.5 percent, the first decline in more than a year, the government said on March 2.
Waning consumer confidence and the global economic crisis have eroded earnings at companies from manufacturer Pacific Brands Ltd. to retailer Harvey Norman Holdings Ltd.
Nearly 40 percent of Australian companies reporting first- half earnings this month either cut or reduced dividends to conserve capital and reduce debt, according to Shane Oliver, senior economist at AMP Capital Investors in Sydney.
Australia & New Zealand Banking Group Ltd., the nation’s fourth-largest lender, said last week it will cut its dividend by about 25 percent, the first reduction since a 1991 recession.
Pacific Brands, the nation’s biggest maker of underwear, said last week it will slash 23 percent of its workforce and halt local manufacturing. Harvey Norman, Australia’s biggest electronics retailer, said on Feb. 27 slowing sales growth helped trigger a 57 percent slump in first-half profit.
The jobless rate rose to 4.8 percent in January, the highest in almost three years, a report showed on Feb. 12.
To stoke boost household spending, the government distributed A$8.9 billion in cash handouts in December, helping fuel a 3.8 percent surge in retail sales in that month. Home- loan approvals also had the biggest gain in almost nine years and business investment rose in the fourth quarter.
The chain price index, a measure of retail prices, climbed 8.5 percent in the fourth quarter from a year earlier, today’s report showed.