Interest rate cut hopes rise and Australian dollar slumps after GDP expands by a weak 0.3%

Government spending has helped the Australian economy avoid an overall contraction even as the Reserve Bank lifted interest rates at the fastest clip in three decades. Photograph: Lisa Maree Williams/Getty Images

Australia’s economy grew at a weaker-than-expected pace in the September quarter despite extra government spending, and slow pace may make early interest rate cuts more likely. The Australian dollar slumped.

Gross domestic product (GDP) expanded 0.3% in the July-September months, the fastest in a year and the 12th quarter in a row of growth, the Australian Bureau of Statistics said on Wednesday. That pace compared with the 0.5% rate expected by economists and the 0.2% growth in the June quarter.