Sydney – Australia’s economy decelerated sharply as the slowdown in China, its biggest trading partner, dented exports and mining construction.
Economic output grew by a less than expected 0.2 per cent in the three months to the end of June. This follows even worse readings from fellow resource economies Canada and Brazil, which this week slipped into recession amid a slump in commodity prices.
Australia’s gross domestic product growth, published on Wednesday, was below consensus estimates of 0.4 per cent and sharply lower than the frst quarter’s 0.9 per cent.
“The major inhibitor to growth is the ongoing fall in mining investment,” said Michael Workman, economist at Commonwealth Bank of Australia. “Other growth detractors are falling mineral and energy commodity prices, thanks to a combination of oversupply by producers and weaker demand from the world’s major buyer, China.”
On an annual basis GDP grew 2 per cent, compared with 2.5 per cent in the previous quarter, and well below long-term trends for an economy that has enjoyed 24 years of unbroken growth on the back of a mining boom driven by China’s thirst for resources.
Shortly before the growth figures were released the Australian dollar fell below 70 US cents for the first time in six years and later hit a low of US$69.82. By mid-afternoon trading it had recovered some ground and was trading at US$70.39.
Adam Boyton, economist at Deutsche Bank, said a slowdown in China and the slump in commodities prices could send the Australian dollar below 60 cents for the first time in 12 years. But he said a weaker currency would boost competitiveness and enable the country to continue its achievement of avoiding recession for almost a quarter of a century.
For the rest of this article, click here: http://www.ft.com/intl/cms/s/0/e23fd346-5131-11e5-9497-c74c95a1a7b1.html#axzz3kU7YzLJc