Homeowners may be able to rest easy for several months before interest rates rise again after the latest national accounts showed the economy grew at a snail's pace in the September quarter.
But federal Treasurer Wayne Swan was unfazed by the slowest growth since the depths of the global financial crisis, saying it was an unsurprising outcome given uncertainty in the world economy, the impact of a higher Australian dollar and the easing back of government stimulus.
"There are bumps in the road for our economy but Australia's fundamentals and growth prospects remain strong," Mr Swan told reporters in Canberra on Wednesday.
The economy grew by just 0.2 per cent in the three months to end September, around half the rate economists had expected, and meant that over the year the economy expanded by 2.7 per cent, rather than closer to the 3.5 per cent rate predicted.
It was a marked slowdown from the revised 1.1 per cent growth in the June quarter, and the weakest quarter since the economy contracted in the final three months of 2008 when the global crisis was at it worst.
Gross domestic product (GDP) then contracted by 1.0 per cent, according to the latest revisions in the national accounts.
However, Mr Swan said the economy was underpinned by a "huge pipeline" of business investment, job creation and a "rapid fiscal consolidation" that would see the budget return to surplus in 2012/13.
But opposition treasury spokesman Joe Hockey said the government continued to "shirk the hard decisions" required to restore economic strong growth.
"It is failing to capitalise on what is for Australia a very strong international environment," Mr Hockey said in a statement.
Household consumption was the largest contributor to growth in the quarter, while the largest contraction came from exports, which Mr Swan blamed on adverse weather that closed some ports in the quarter.
The Australian dollar tumbled around half a US cent to below 96 cents on the national accounts report, while money markets further wound back expectations of another interest rate rise in the near term by the Reserve Bank of Australia (RBA).
TD Securities head of Asia-Pacific research Annette Beacher said she still expected a 25-basis point increase in the cash rate to 5.0 per cent in February or March of next year.
"There is clear evidence of rising inflation ... and accelerating wages growth is reflecting our fully employed economy," she said.
"(But) allowing for the RBA's flexibility now it has achieved restrictive monetary policy, means this timing can easily slip into April without compromising the big picture."
Business wants the central bank to hold fire on further rate moves, with its pre-emptive rate hike in November leaving scope for a pause to confirm the economic recovery remains on course.
"The Australian economy is delicately poised at the moment," the Australian Chamber of Commerce and Industry's director of economics and industry policy Greg Evans said.
"A private sector-driven recovery is struggling to gain traction even as the boost from temporary stimulus begins to wane."
Mr Swan said the winding back of the government's stimulus detracted 0.3 percentage points from September quarter growth, adding that the timing and pace of the withdrawal remained "appropriate".
