Fall in Australia's GDP growth to 0.3pc for quarter puts pressure on rates

Australia's economic growth unexpectedly slowed last quarter as sliding export prices took a heavy toll on national income, and the outlook is even darker given the rout in global commodity prices of recent weeks.

The Australian dollar dived to four-year lows at 83.92 US cents and markets narrowed the odds of another cut in interest rates after gross domestic product rose just 0.3 per cent in the third quarter. That was less than half the pace analysts expected, and the smallest increase since early last year.

Growth for the year held at 2.7 per cent, well short of the 3.1 per cent forecast by economists, and seemed certain to slow given the gloom hanging over commodity markets.

"This dynamic is unlikely to change in 2015 as the economy adjusts to structurally lower national income growth," said Ong Su-Lin, a senior economist at RBC Capital Markets.

"It is the nominal and income story that we continue to focus on and they remain the key drivers of confidence, expenditure and activity."

As a major commodity exporter, Australia benefited hugely from the China-driven boom in prices of the past decade. With many prices now in free fall, it is squeezing everything from company profits to investment, wages and tax receipts.