Mark Mulligan -Dec 3, 2014
NAB said on Tuesday its business confidence index for May climbed four points to seven points, its highest level since August last year. Photo: Peter Braig
The Australian dollar plummeted to fresh 4½-year lows on Wednesday as the country entered a technical income recession and gross domestic product expanded just 0.3 per cent in the September quarter.
At midday, the Aussie was trading at US84.07¢, having earlier dropped about half a US cent to US83.92¢. The sharp decline reflected market surprise at the weakness of Wednesday's national accounts.
The Australian Bureau of Statistics said the value of goods and services produced in the quarter expanded 0.3 per cent in seasonally-adjusted terms, translating to year-on-year growth of 2.7 per cent.
This compares with an average 2.9 per cent over the past decade and a 15-year average of 3.1 per cent.
Wednesday's data was well below economists' forecasts of about 0.7 per cent for the month and 3.1 per cent for the year.
Growth was led by the contribution from export volumes but was held back by weak business inventories and public and private sector investment.
The figures follow GDP growth of 0.5 per cent in the previous quarter, which translated to growth of 3.1 per cent year on year.
Real net national disposable income, which measures what Australian
governments, businesses and households receive in exchange for goods and services, contracted for the second quarter in succession, which is the normal definition of a recession.
It shrank 0.3 per cent, after falling 0.2 per cent in the June quarter. The contraction largely reflects sliding commodity prices, which has led to a sharp fall in the country's terms of trade.
The ABS said the terms of trade fell 3.5 per cent in the quarter, for a year-on-year decline of 8.9 per cent.
What Australia earns in exports buys a decreasing amount of imports. This weakening exchange also shows up in falling government tax receipts, weaker corporate profits and declining or stagnant real wages.
ANZ chief economist Felicity Emmett described the slowing growth as a "disappointing result". She said that, when measured in income terms, nominal GDP contracted 0.1 per cent in the quarter.
"Soft income growth will weigh on profits, wages and public revenues, and flow through to softer consumer spending, business investment and public demand," Ms Emmett said.
She said the data revealed that non-resources industries had been slow to pick up the slack left by the end of the mining infrastructure boom.
"Moreover, the drag from the wind-back in mining investment still has a long way to run and is likely to be much sharper over coming quarters as large-scale LNG projects approach completion."