-National Australia Bank Ltd. Chief Economist Alan Oster
Clouds are massing on Australian economy after data showed sharper-than-expected slowdown in the first quarter's GDP. Australian economy, which is currently in its 22nd consecutive year of growth, expanded just 0.6% in the first three months of 2013, missing analysts' expectations of a 0.8%. On a yearly basis, the gross domestic product expanded 2.5%, the weakest since the second quarter of 2011, the Bureau of Statistics said Wednesday.
Earlier this week, the Reserve Bank of Australia led by the Governor Glenn Stevens and his board decided to keep the overnight cash-rate target at 2.75%, as the central bank assesses the effect on the economy of a series of previous cuts. However, the commodities-powered country is facing a painful transition away from its reliance on the mining sector. Soon after the report, the Australian Dollar dropped 0.25% to 96.11 U.S. cents, as investors are suggesting further rate cuts.
The recent figures reflected an increase in consumption, which was boosted by lower interest rates, though a decline in business investment may weight on internal demand. In the meantime, weaker-than-expected growth is also pointing at weakness in domestic demand.
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