Australia's economy expands 0.4% in the fourth-quarter

  • 7 March 2012
  • From the section Business

Australia's economy has expanded by less than expected in the fourth quarter of 2011, as business spending dropped, sending the dollar to a six-week low.

Gross domestic product rose by 0.4% in the three months to the end of December compared with the previous three months, said theBureau of Statistics.

Analysts were expecting growth of 0.8%.

However, growth is expected to pick up due to high levels of resource investment.

Trade worries

Australia's economy is largely dependent on its mining sector for growth and has benefited from strong resource demand from India and China, its biggest trading partner.

However, in recent months demand from those countries has weakened, as their own economies slow, and has pushed down commodity prices.

On Wednesday the Australian Bureau of Statistics said the country's terms of trade, the value of its imports versus its exports, fell 4.7% in the quarter,

It was the first fall for the measure since September 2009.

Image caption Australia's mining sector has been one of the main contributors to its economic growth

"We've seen a big fall in the terms of trade, and what they've highlighted at first glance is our exposure to that terms of trade story," said Michael Blythe, from the Commonwealth Bank of Australia.

"The economy goes well when the terms of trade is rising, but when it turns against us, it weighs on economic activity."

Future outlook

However, most analysts say that growth is expected to pick up in the coming months.

"We're doing much better than most," said Stephen Walters, from JP Morgan.

The economy grew by 2.3% in the fourth quarter, when compared to the same period last year.

The Reserve Bank of Australia (RBA) said it still expects growth of 3-3.5% this year and next.

On Tuesday the RBA kept interest rates on hold at 4.25% in a bid to boost growth.

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