Australian Economy Stalls; Central Bank Raises Rate

[bemildred]

March 2 (Bloomberg) -- Australia's economy grew just 0.1 percent in the fourth quarter, prompting speculation the central bank's first interest-rate increase in 15 months today will be the last this year. The nation's currency slumped.

Gross domestic product expanded at the weakest pace in four years as home building declined and consumer spending slowed, the Australian Bureau of Statistics said in Sydney today. Governor Ian Macfarlane said his board increased the overnight cash rate target a quarter percentage point to 5.5 percent ``to reduce the risk of an unacceptable rise in inflation.''

The highest benchmark rate in four years may slow consumer and business spending, threatening to further cool the fifth-largest economy in the Asia-Pacific region. Companies including Miller's Retail Ltd. argued the central bank should have refrained from raising borrowing costs to protect a 14-year expansion.

``The Reserve Bank doesn't need to raise rates again,'' Michael Thomas, head of economics at ICAP Australia Ltd., said in Sydney. ``The rate move today is controversial given the slowing economy.''

Bloomberg