Australia’s economy slowed more than expected in the third quarter, dragged down by falling private investment, data showed yesterday, in another sign of the nation’s rocky transition away from mining-led growth.
The economy expanded by 0.3 percent in the three months to September, down from 0.5 percent in the previous quarter, to take the annual rate of growth to 2.7 percent, the Australian Bureau of Statistics said.
“These national accounts reflect, quite starkly, the resources sector switching from significant investment to significant production,” Australian Treasurer Joe Hockey told reporters.
“Iron ore production in particular has picked up more strongly than expected at budget time [in May]. However, prices for iron ore and thermal coal, two of our biggest exports, have fallen dramatically in recent times,” he said.
The new readings were well below analysts’ forecasts of 0.7 percent quarterly growth for a year-on-year rate of 3.1 percent, and sent the Australian dollar plunging three-quarters of a cent.
The local unit fell from the day’s high of almost US$0.85 to a fresh four-year low of under US$0.84.
“There’s always two sides to a boom,” JPMorgan economist Tom Kennedy said. “We’ve had the good side of it, and now we are seeing a little bit of unwind from the investment boom.”
“It looks like almost all of the surprise here is from the private capex [capital expenditure] front, which took off 0.5 [percentage points] from GDP and we were expecting a much smaller drag from that,” he said.
Net exports supported growth, expanding by a seasonally adjusted 0.8 percentage points, while consumer spending rose by 0.4 percentage points. However, private capital spending slipped by 0.5 percentage points and public investment eased by 0.2 percentage points.
Despite the Reserve Bank of Australia’s decision to keep interest rates at a record low of 2.5 percent, as business spending declines, growth has slipped below trend, while the unemployment rate has edged up to a decade high of more than 6 percent.
Sharp falls in commodity prices, particularly due to a slowdown in major consumer China and a global supply glut, have also hit Australia’s growth. The terms of trade declined 3.5 percent, the data showed, while real gross domestic income — a measure of the nation’s earnings — fell by 0.4 percent, after declining 0.3 percent in the June quarter.
Economists said the figures were broadly in line with the central bank’s outlook and reinforced its decision to maintain an accommodative monetary policy stance and call for a weaker exchange rate to support non-mining industries.
The central bank last month forecast an expansion rate of 2.5 percent in the year ending this month, and for GDP growth to come in between 2 and 3 percent in the 12 months to June next year.
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