Australia’s economy slowed last quarter as the government and consumers tightened spending, validating the central bank’s decision to cut interest rates yesterday.
Third-quarter gross domestic product advanced 0.5 per cent from the previous three months, when it expanded 0.6 per cent. The result compared with the median of 25 estimates in a Bloomberg News survey for a 0.6 per cent gain.
The report covers a period when companies scaled back mining projects in response to lower commodity prices. Reserve Bank of Australia Governor Glenn Stevens lowered rates four times this year to help support consumption and the nation’s housing market as an elevated currency extended a slump in manufacturing and services, and the government sought spending cuts to eliminate a budget deficit.
“Consumer spending has slowed,” Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia, said in research report before the release. “Similarly, the weakness in external growth, particularly in Asia, led exports to stall.”
The local dollar traded at US$1.0476 in Sydney morning trade after the number was released compared with US$1.0477 before the data.
Compared with a year earlier, the economy expanded 3.1 per cent in the third quarter, the report showed. That matched the median forecast of economists in a Bloomberg survey.
Household consumption rose 0.3 per cent in the third quarter, adding 0.2 per centage point to GDP growth, after a 0.7 per cent gain in the April-June period, today’s report showed. Machinery and equipment advanced 6.2 per cent last quarter, adding 0.4 point to the expansion, it showed. Government spending fell 0.4 per cent, subtracting 0.1 per cent from GDP growth.
The nation’s household savings rate fell to 10.6 per cent in the three months through September from a revised 10.9 per cent in the second quarter, today’s report showed.
The RBA on Tuesday cut its benchmark interest rate to 3 per cent, matching the half-century low set during the 2009 global recession, as hiring falters and an elevated currency hurts industries such as manufacturing and tourism.
Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred gains in the currency, which closed above parity with the U.S. dollar for all but 23 days this year. The Aussie has averaged about US$1.03 in the past two years, compared with 73 US cents in the prior decade.
BHP, the world’s biggest miner, last quarter decided to delay approval of an estimated US$33 billion expansion of the Olympic Dam copper, uranium and gold mine. Fortescue Metals Group Ltd., Australia’s biggest iron ore producer after Rio Tinto Group and BHP, said during the period that it’s cutting capital spending and jobs.
Also weighing on growth is fiscal tightening. Prime Minister Julia Gillard’s government aims for a A$44 billion ($46 billion) swing back to a budget surplus before an election due late next year.