Australia’s economy slowed in the December quarter, but not by enough to force a change of thinking on interest rates at the Reserve Bank. But the news, plus signs of a further easing in activity in January, could very well be enough to keep the RBA on the sidelines for most of this year after yesterday’s rise.

The Australian Bureau of Statistics said that the country’s real gross domestic product (GDP) rose by a seasonally adjusted 0.6% in the December quarter, compared to an upwardly revised rise of 1.1% (1.0% originally) in the September quarter.

Driving the growth was continued strong consumption by households, even if retail sales growth was trimmed in the final two months by the ABS yesterday. That is what the RBA was worried about. But it’s the slowest quarterly growth rate for the year, but GDP still rose a strong 3.9% over the 12 months, still probably too strong for the RBA’s liking.

Economists say the huge current account drain, caused in part by the inability to ship as much coal, iron ore and other resources into world markets, and slower construction activity were factors in the slower growth.

The outcome matches forecasts from market economists for a rise of 0.6% in the December quarter and an annual rate of 3.7%. Against these national account figures, the official rate rises and top ups expected from major banks, the RBA will now be encouraged not to do anything for some months, even if the CPI figures for March on 23 April are again well above that the central bank would find acceptable.

Inflation is the bank’s main worry and the national accounts show that the chain price index, a measure of retail prices in the economy, rose 0.6% in the fourth quarter from September, to be 2.8% over the year, uncomfortably close to the RBA’s target. This measure is different to the CPI.

Household final consumption expenditure rose 1.6% the quarter (1.2% in September) and was up 5.0% over the year to December, seasonally adjusted. Total investment in dwellings increased 2.1% in the quarter, to be up 1.6% in the year to December as it was boosted by investment in flats and units.

Total gross fixed capital formation rose 1.4% in the quarter and was up 8.2% over the year, adjusted as the resources and infrastructure investment booms rolled on. But that also represented a slowdown from the 10% annual growth rates in the year to September.

Domestic final demand grew 1.6% in the quarter and was 5.7% higher over the year, seasonally adjusted.

That’s the figure the RBA will be looking at with suspicion because that’s where the inflationary and capacity problems are showing up.