Business

Australia's economy grows 2.5% on year

Sydney Harbour Image copyright AFP
Image caption Australia's economy grew in line with expectations in the fourth quarter

Australia's economy grew 2.5% in the fourth quarter of 2014 from a year earlier, marking its slowest pace of annual growth last year.

The economy grew 0.5% in the October to December period from the last quarter, when quarterly growth was 0.4%.

Both figures were in line with economists' expectations.

The data comes a day after the Reserve Bank of Australia decided to leave interest rates unchanged at a record low of 2.25%, despite calls for a cut.

Katrina Ell, economist at Moody's Analytics, said the country's economy performed " reasonably well" in the fourth quarter, regaining some of the momentum lost in the previous three months.

"[But] the data does not change our view that further rate cuts are needed to lift the non-mining economy as mining investment drags on growth," she said.

More cuts ahead

The country's central bank cut interest rates for the first time in 18 months in February to an all-time low to boost a sluggish economy.

But, economists are calling for more cuts ahead as Wednesday's data continues to show signs of a softer economy.

Despite Australia "doing well" compared to most developed economies, Paul Bloxham, chief economist at HSBC, said that growth remained below trend.

"A massive ramp up in exports of iron ore and coal is still a key driver of growth, as new capacity comes on line, but mining investment is falling quite sharply," he said.

While there were signs that growth was rebalancing to non-mining sectors of the economy, such as property and household consumption, the move had been slow, he added.

Meanwhile, markets showed little reaction to the growth figures, with the S&P ASX 200 index down 0.5% to 5,906.8 points.

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