The Australian economy slowed sharply in the June quarter, but not as much as most economists had feared.

Bureau of Statistics figures show Australia’s economy grew by 0.5 per cent in the June quarter, slightly ahead of economist forecasts.

Economist forecasts centred on a rise of 0.4 per cent for the quarter, according to surveys by both Reuters and Bloomberg.

• Interest rates left on hold at record lows

The ABS gross domestic product (GDP) data show annual growth of 3.1 per cent over the year to June 30, also slightly ahead of forecasts, and fairly close to what economists see as Australia’s average growth rate.

However, the result was a clear slowdown from the March quarter’s export driven 1.1 per cent expansion in the economy, which had pushed annual growth up to 3.5 per cent.

Adding most strongly to the June quarter’s economic growth was a rise in inventories, which boosted the quarterly figure by 0.9 percentage points, as businesses restocked after having let their inventories run down in the first quarter.

Other boosts to economic growth came from household consumption (0.3 percentage points) and business investment in buildings (0.3 percentage points).

The main drag on the figures was a foreshadowed fall in net exports, which cut 0.9 percentage points off the overall growth number after having added 1.4 percentage points to GDP in the first quarter.

Public investment in infrastructure and buildings also fell, taking 0.2 percentage points off growth.

Australia likely to ‘muddle along’

Market reaction to the numbers was muted, as they came in so close to forecasts.

The Australian dollar initially jumped a fraction, but quickly fell back to the levels seen just before the ABS release at 11:30am (AEST) around 92.8 US cents.

RBC Capital Markets senior economist Su-Lin Ong says she cannot see any reason why economic growth will accelerate significantly from here over the next few quarters.

“There is a number of headwinds in the second half. The resource capex downturn will intensify and the labour market is looking patchy,” she told Reuters.

“I think we’ll muddle along at this very modest pace of growth for some time. I see the RBA on hold for the foreseeable future.”