SYDNEY - A surprise fall in gross domestic product (GDP) in the December quarter has changed the Australian economic landscape.
The Australian Bureau of Statistics said on Wednesday that GDP fell by 0.5 per cent in the quarter in seasonally adjusted volume (inflation-adjusted) terms.
Economists, encouraged by data on Tuesday
showing a likely fall in spending was offset by a big drop in imports in the quarter, had been expecting the figures to show a slight increase in GDP of around 0.2 per cent.
The GDP figure published by the ABS every quarter is an average of three measures, based on estimates of incomes (including profits and wages), expenditures (like consumption and investment) and production (value added by industry).
In theory these should add up to the same number but in practice they do not.
On the income side, weak company profits and aggregate wages data released yesterday warned of a risk of a negative GDP result.
However, most of the reliable information ahead of the national accounts report relates to the expenditure measure and these figures, including retail trade, capital spending and foreign trade, dominated expectations.
In the December quarter, the expenditure-based measure was unchanged and therefore close to economists' forecasts.
However, the production measure of GDP fell by 0.6 per cent and the income measure was down by 0.9 per cent, meaning the average was down 0.5 per cent.
Either way, the economy was weak.
Although there is a question mark over the extent of weakness, it is hard to deny that the economy had most likely shifted into reverse gear by the end of last year.
The economy only narrowly escaped the usual arbitrary definition of recession - two consecutive quarterly falls in GDP - with a narrow increase of just 0.1 per cent in the September quarter.
The figures suggest the Reserve Bank of Australia (RBA) will lean a little more toward cutting interest rates again.
Its most recent estimate was that the economy was flat in the December quarter and will record roughly no growth through the year to mid-2009.
That assessment of the economy is now looking a little optimistic, implying monetary policy will probably be eased again when the RBA's board next meets on April 7.
- AAP
