Australian GDP shrinks

Australia’s GDP shrank by 0.5% on a seasonally adjusted basis in the fourth quarter of 2008, showing the impact of the financial crisis on a country which has held up better than most. GDP had risen in the previous quarter by 0.1% but the country now appears to risk recession.

Wayne Swan, the country’s treasurer, said in a statement that the figure was a “sobering reflection of the extremely difficult global environment”, but noted the drop was smaller than in other economies including America and Britain.

Statistics released yesterday show the country’s current account deficit narrowed in the same quarter. At the end of 2008 it stood at A$6.5 billion (£2.9 billion), or 2.2% of nominal GDP for the previous quarter.

The country’s imports fell faster than its exports, while a rise in trade surplus from A$1.4 billion in the third quarter to A$4.1 billion in the fourth was also propelled by increases in the price of coal exports.

Household consumption grew by 0.1% during the quarter, but business investment growth slowed to 1.1%.

The Australian dollar rallied on Tuesday after a surprise choice by the central bank to keep interest rates on hold at 3.25% despite the signs of downturn.

The Reserve Bank said the government’s A$6.7 billion fiscal stimulus package, announced in the autumn, had enabled the country to avoid levels of recession seen elsewhere.

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