Wednesday March 4, 01:55 AM
Australian economy sees first contraction in eight years
CANBERRA (AFP) - Australia's economy contracted for the first time in eight years with a shock 0.5 percent negative growth rate in the December quarter, official data released Wednesday showed.
The figures, well below market expectations of 0.1 percent growth, came despite government attempts to kick start the economy with two stimulus packages worth more than 50 billion dollars (32.5 billion US).
While the economy grew 0.3 percent for calendar 2008, economists said the slip into negative territory in the final three months of the year showed Australia was at risk of slipping into a recession.
The figures sparked a plunge in the Australian dollar, which fell 0.65 US cents to 63.15 US cents immediately after the announcement, while the benchmark SP (S13.SI - news) /ASX200 share index was down 1.85 percent at noon.
"The market really wasn't expecting this," Bell Direct analyst Julia Lee told Sky News.
"A fall of 0.5 percent is quite significant ... we're seeing a severe reaction on the market."
"It's really starting to price in a recession in 2009 and probably not a recovery until maybe 2010."
Australia had enjoyed a long period of economic growth on the back of a China-led resources boom but economists said the global slowdown was beginning to weigh on the nation once dubbed "the Lucky Country."
Kinetic Securities chief economist Clifford Bennett said the result was far worse that he expected and pushed Australia towards a recession, usually defined as two successive quarters of negative growth.
"I was one of those people who thought we would avoid a technical recession but I do think the first quarter (of 2009) could be worse that the last quarter (of 2008)," he said.
"There's a real chance now we will get more negative growth in the first quarter."
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