Slowing China drags on Australia
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Slowing momentum in China curbed Australia's economic growth to 0.5 per cent in the three months to September and 3.1 per cent from a year earlier, official data showed yesterday.
The Australian Bureau of Statistics (ABS) said gross domestic product grew a seasonally adjusted 0.5 per cent in the quarter, in line with expectations, driven by mining and manufacturing.
That compared with growth of 0.6 per cent in the three months to June and year-on-year growth of 3.7 per cent last quarter, lending weight to the central bank's decision to cut interest rates on Tuesday to stimulate the economy.
Treasurer Wayne Swan hailed the "solid" data, saying it was more evidence of "the ongoing resilience of the Australian economy in the face of a difficult and volatile global environment".
Mining contributed 0.4 per cent to quarterly GDP growth, despite a plunge in commodity prices due to cooling in China's economy that caused a drop in Australia's terms of trade - the value of exports against imports.
Spot prices for iron ore and coal waned by 10-20 per cent in US dollar terms, with the terms of trade sagging 13.7 per cent in the year to September.
The ABS said the value of the mining sector grew 4.5 per cent in the quarter, driven by new oil and gas production coming online. Most sectors were sluggish.
The Reserve Bank of Australia slashed the official interest rate by 25 basis points to 3 per cent this week - equal to the lowest since RBA independence in the early 1990s and a level not seen since the 2009 global crisis.
RBA governor Glenn Stevens said mining investment would soon reach its peak, and other areas of the economy would need to pick up the slack as Australia looked to transition away from a resources-dominated economy.
Analysts have warned that more rate cuts may be needed as the government seeks to rein in spending to meet a targeted budget surplus next year.