"Today's numbers are a reminder of the tough trading conditions in the economy, particularly outside of the mining sector."
- Joe Hockey, Treasurer
The Australian Dollar extended its decline against the U.S. counterpart and hit the psychologically important level of 0.90 on Wednesday, as a report showed Oz economy expanded at a slower-than-expected pace last quarter, intensifying debates the RBA will have to do more to spur growth.
The Australian Bureau of Statistics said the economy posted a 0.6% increase from the previous three months, when it advanced 0.7%, versus analysts' estimates of a 0.7% gain. On an annual basis growth stood at 2.3%, already a third consecutive quarter below 2.5% and below expectations of 2.6%. A 1.4% drop in private investment subtracted about 1.4% from GDP, while inventories cut 0.5%. Following the disappointing data RBA Governor Glenn Stevens pointed out strong domestic currency is preventing economy from gaining momentum and said a decline in the Aussie would help to rebalance the economy, favouring production over imports. Last month Stevens tried to make it clear that the strength of the national currency is not supported by higher production levels and costs in the economy, and, according to his projections, it will come down at some stage.
In the meantime, economists at Moody's Analytics said the 3% growth in 2014 looks already unrealistic, suggesting the central bank would be forced to adjust its monetary policy.
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