Australian economy grows slower than forecast in Q1

Australia\'s economy grew at a slower-than-expected pace in the first three months of the year as the commodities-powered nation faces a painful transition away from its reliance on the mining sector. The Australian Bureau of Statistics said the economy expanded 0.6 percent on quarter and 2.5 percent on year -- short of the estimated 0.7 percent and 2.7 percent, and showing a decade-long mining investment boom is unwinding. Though a surge in mining exports was one of the key drivers of the March quarter performance as years of spending on projects finally comes online, Treasurer Wayne Swan said the data confirmed investment in the key sector \"is near its peak\". \"We have an economy in transition, we have a high dollar which is making that transition hard,\" Swan told reporters. \"But the reality is the Australian economy is in good shape and it is handling these transitions very well.\" New private business investment fell 4.3 percent as resources spending slowed and capital imports, covering items such as mining equipment, fell 12.3 percent. The central bank cut interest rates to a record low 2.75 percent in May seeking to stimulate non-mining areas of the economy as the investment peak loomed. The rate cut was also aimed at Australia\'s stubbornly robust dollar, which had -- until recently -- traded at or above parity with the greenback for about two-and-a-half years, squeezing local industries. The commodities-linked currency has fallen 6.5 percent since early April, helped by the Reserve Bank of Australia\'s cuts. Swan said the economy remained a \"standout in terms of the developed world\", despite the challenges of economic reform and a high Australian dollar. Swan said half of all advanced economies that had released March quarter data had seen a contraction over the year; by comparison Australia had grown at three times the OECD average. But analysts said the subdued data confirmed RBA forecasts of below-average growth this year, with risks to the downside. \"Over the last few quarters the economy has been growing at a sub-2.5 percent pace -- this is as low as policymakers have thought we were going to go,\" said Macquarie economist Brian Redican. \"Given that we are losing the previous growth drivers it does point to risk.\" The RBA scaled back its outlook last month, warning of muted 2.5 percent growth for the year ended December 31 as the economy embarks on an \"uncertain\" diversification programme. Swan said exports had expanded 8.1 percent in the past 12 months -- the second-fastest annual growth on record -- helped by a boom in coal and iron ore volumes as years of investment finally came online. Mining production increased 1.5 percent in the quarter. Consumer spending also increased modestly in the quarter, contributing to growth. The Australian dollar fell to 96.12 US cents on the data, from a day high of 96.55 cents, with the figures seen as increasing the chances of further rate cuts.