GDP grew 0.6% in the June quarter; Services sector hits worst contraction rate since the GFC: Midday Roundup

The Australian economy grew 0.6% during the June quarter, driven by household consumption and changes in inventories.

The latest GDP figures from the Australian Bureau of Statistics show national growth expanded in line with analysts’ expectations.

During the year to June, the national growth rate was 2.6%.

The industries driving growth in the June quarter included finance, mining and construction, with the finance sector contributing 0.2% to GDP.

Services sector hits worst contraction rate since the GFC

The services sector is at its lowest point since the GFC, with the latest Australian Industry Group survey showing the sector remains in decline.

The Performance of Services Index released today revealed the services sector slipped 0.4 points to 39 on the index, as services businesses are continuing to contract.

A rating below 50 on the index indicates contraction.

Despite the decline, there was an improvement in new orders, up 5.5 points to 39.8. But this was not enough to offset the 9 point fall to 34.1 from supplier deliver category.

In a statement, Australian Industry Group chief executive Innes Willox says many of Australia’s key services industries remain under considerable stress.

“Low interest rates and a lower Australian dollar should be supporting local retail and consumer spending,” he says.

“However, cautious consumers are keeping their hands in their pockets and are reluctant to take on debt.”

Rudd stands strong on the carbon tax

The Labor party is not about the “pull up the white flag” on climate change, despite the Liberal party promising to axe the controversial carbon tax should it win the election.

Prime Minister Kevin Rudd says Labor won’t back down on its policy, as global warming isn’t going away.

“If we in Australia turn our back on it, it licences everyone around the world to do the same,” he says.

“It’s exactly the wrong time to do a U-turn on this.”

Shares fall on open

Aussie shares have dropped on open, falling more than half a per cent lower.

The S&P/ASX 200 index was down 37.8 points to 5151.8 just before midday.

The health care and consumer staples sectors fell significantly, down 189 and 117.8 points respectively.