Slowing momentum in China curbed Australia’s economic growth to 0.5 percent in the three months to September and 3.1 percent from a year earlier, data showed yesterday.
The Australian Bureau of Statistics (ABS) said GDP grew a seasonally adjusted 0.5 percent in the quarter, in line with expectations, driven by the mining and manufacturing sectors.
That compared with growth of 0.6 percent in the three months to June and year-on-year growth of 3.7 percent last quarter, lending weight to the central bank’s decision to cut interest rates on Tuesday to stimulate the economy.
Australian 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 percent to quarterly GDP growth, despite a plunge in commodity prices due to cooling in China’s economy that saw a 4 percent drop in Australia’s terms of trade — the value of its exports against its imports.
Spot prices for iron ore and coal waned by 10 to 20 percent in US dollar terms in the quarter, with the terms of trade sagging 13.7 percent in the year to September.
The ABS said the value of the mining sector expanded 4.5 percent in the quarter, driven by new oil and gas production coming online. Most other sectors were sluggish.
The Reserve Bank of Australia (RBA) slashed the official interest rate by 25 basis points to 3 percent on Tuesday — a level not seen since the height of the 2007 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 looks to transition away from a resources-dominated economy.
Analysts have warned that further rate cuts may be needed as the government seeks to rein in spending to meet a targeted budget surplus next year.
“This is a fairly sluggish rate of growth, even with mining investment adding to growth, and before the major fiscal cutbacks begin to come through,” Macquarie economist Brian Redican said.
Swan remained upbeat, saying Australia was growing faster than other advanced economies and the expansion was “reasonably broad-based” despite a strong Aussie dollar hurting some industries and consumer confidence remaining muted.
He conceded that the commodities slowdown had “weighed on some investment decisions,” with a number of major miners shelving or delaying projects amid warnings from the RBA and others that the price boom had peaked.
However, he said resources firms were still committed to spend a record A$268 billion (US$280 billion) on projects in coming years, with A$109 billion slated in the year to June 30, 2013, up 33 percent on-year.