The Australian economy decreased for the first time in eight years in the fourth quarter of 2008 according to a release today by the Australian Bureau of Statistics. The GDP report showed that the Gross Domestic 
Product declined by 0.5 percent in the October to December quarter following growth in the third quarter by a revised 0.1 percent. On an annual basis, the GDP grew by 0.3 percent over the fourth quarter of 2008 following an annual growth rate of 1.9 percent in the third quarter.
Economic forecasts had expected that the GDP growth would be 0.2 percent for the fourth quarter and 1.2 percent for the annual growth rate over the fourth quarter of 2007.
The fourth quarter GDP was the lowest quarterly reading since the December of 2000 quarter when the GDP contracted by 0.8 percent. Contributing negatively to the GDP decline for the quarter was a decrease in the manufacturing sector by 0.5 percent while wholesale trade fell by 0.2 percent. Excluding the farming sector, the GDP contracted by 0.8 percent.
Today’s GDP release comes a day after the Reserve Bank of Australia decided to hold its interest rate steady at 3.25 percent after two consecutive 100 basis point reductions. The RBA has shaved off 3.75 percentage points from the official cash rate since October 2008 to help fight a slowing Australian economy amid the global economic slowdown.
AUD/USD Chart – The Australian dollar fell sharply against the US dollar following the more than expected decline in the GDP data.
