Australia's economic growth rate slows on spending cuts

Media playback is unsupported on your device
Media captionAustralia's latest GDP figures show economic growth slowing but remains stronger than in most advanced economies, Duncan Kennedy reports.

Australia's economic growth rate slowed modestly in the last quarter as the government cut spending and earnings from exports declined.

Compared with the previous three months, growth came in at 0.5%, down from 0.6%, the Bureau of Statistics said.

On Tuesday the central bank cut a key interest rate to 3% in an effort to spur growth.

Analysts said more action would be needed given risks ahead.

'Loss of momentum'

Treasurer Wayne Swan said the data was more evidence of "the ongoing resilience of the Australian economy in the face of a difficult and volatile global environment".

Growth was 3.1% year on year, the Bureau of Statistics said, in line with expectations but down from 3.7% last quarter.

However, analysts predict that the mining investment boom that has been driving much of Australia's growth will peak in 2013.

"The risks are that the loss of momentum in mining investment and therefore in business investment generally, gathers pace, and the other sectors of the economy don't grow to fill the gap at all," said Shane Oliver, chief economist at AMP Capital Investors.

Resource-rich Australia has seen years of growth fuelled by a boom in mining, as developing countries such as China look for commodities such as coal and iron ore to grow their economies.

A slowdown will become hard to avoid once that demand slows next year.

"Australian economic growth is expected to decelerate in 2013, as the pace of growth in business investment slows and the combined influences of cautious consumer spending and a fragile world economy take a firmer hold," said Stephen Halmarick, as chairman of the association of Australian Business Economists.

The Statistics Bureau said growth for the July to September quarter was driven by a 0.5 percentage point contribution from private business investment.

A fall in public investment, mainly government infrastructure spending, took 0.5 percentage points off the final growth figure.

More on this story