Australian economy contracts 0.5 percent in September

Markets Associated Press

Australia's economy contracted in the September quarter for the first time since early 2011, the government said Wednesday, as the economy adjusts to weaker Chinese demand for its biggest exports, iron ore and coal.

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The economy contracted by 0.5 percent over the three months. Annual growth was 1.8 percent, the Australian Bureau of Statistics said.

Growth in the year through June had been 3.1 percent.

A decline in new business investment was the dominant cause for the contraction in September, Treasurer Scott Morrison said.

He would not speculate on whether the December quarter would also contract, technically creating Australia's first recession in 25 years.

"I think the consensus forecasts and the other commentary demonstrates going forward there are a lot of things to be positive about. I am not one to speculate on those matters. We will wait and see the data," Morrison told reporters.

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He called on a hostile Senate to respond by passing the government's economic agenda.

"The contraction in real GDP recorded in the September quarter is not just a reminder, not just a wake-up call or a warning about being complacent when it comes to economic growth," Morrison said.

"It is a demand to support economic policies that drive the investment needed to support job security, the hours and wages that hard-working Australians need to deal with rising costs of living, especially on electricity costs and that businesses need to survive in a tough and competitive environment," he said.

The economy last shrunk in March 2011 after record flooding effected farm and coal exports, and before then in September 2008 after the global financial crisis.

Record commodity prices driven by Chinese demand helped Australia avoid recession after the global economic downturn. The demand caused a surge in investment in Australia mine construction which is continuing to decline.