Australia's Growth Slows

Australia's economy grew at the slowest pace in more than a year in the fourth quarter as construction declined and bottlenecks at ports cut exports., Bloomberg 3/4/2008 5:18:44 PM

Gross domestic product rose 0.6 percent from the third quarter, when it increased a revised 1.1 percent, the Bureau of Statistics said in Sydney today. The gain matched the median estimate of 24 economists surveyed by Bloomberg News. The economy grew 3.9 percent from a year earlier.

Slower growth may allow the central bank to delay further rate increases after Governor Glenn Stevens raised the benchmark to a 12-year high of 7.25 percent yesterday to cool the fastest inflation in almost two decades. The economy has expanded for 28 consecutive quarters as Chinese demand for resources fuels a mining boom that has pushed unemployment to the lowest since 1974.

The Australian dollar traded at 92.55 U.S. cents at 11:47 a.m. in Sydney from 92.64 cents before the report was released. The yield on the two-year bond fell 1 basis point to 6.52 percent. A basis point is 0.01 percentage point.

Australia's stock market has dropped 14 percent this year on concern that fallout from the U.S. housing recession is spreading to Europe and Asia, cutting company profits and slowing growth in the nation's biggest trading partners.

The economy was battered in the fourth quarter as ``weather disruptions hampered exports,'' Westpac's Hassan said. Overseas sales were hit by a surge in the Australian dollar, which rose 11 percent against its U.S. counterpart in 2007.

Growth may continue to slow in coming quarters as households and businesses pare back spending after the Reserve Bank of Australia increased borrowing costs four times in seven months, adding 100 basis points to the benchmark rate since August.

Recent reports suggest consumer spending, which accounts for more than half of the nation's A$1 trillion ($930 billion) economy, has already cooled. Retail sales growth stalled in January after expanding for seven months.

An index of leading growth indicators fell in December for the first time in almost three years and business confidence slumped in January to the lowest since the September 2001 terrorist attacks in the U.S. An expansion in the construction industry slowed as demand for homes eased, and consumer sentiment dropped in February to a 15-month low, recent reports show.