The Australian economy contracted in the final three months of...

The Australian economy contracted in the final three months of last year, surprising analysts and suggesting the nation will enter a recession this year.

Gross domestic product growth for the fourth quarter dipped 0.5%, the Australian Bureau of Statistics said, following a 0.1% rise in the third quarter. Analysts surveyed by Bloomberg expected the economy to grow by 0.2% in the fourth quarter.

For the year, the economy expanded 0.3%, less than expectations of a 1.2% increase according to a Bloomberg survey.

The lower growth figures come one day after the Reserve Bank justified a decision to leave interest rates unchanged in part because the economy had not "experienced the sort of large contraction seen elsewhere.''

The RBA decided to hold rates steady at a 1964 low, citing the strength of the Australian financial system and the flow-through effects of the 4 percentage points in cuts already made since September.

theage.com.au