It was the pause that refreshes as economic growth slowed, as expected in the September quarter.

There was nothing in today’s September quarter national accounts from the Australian Bureau of Statistics to confuse or alarm anyone, perhaps not even the federal Opposition.

Nor will it spark a spate of rate-rise-looms comments.

Economic growth slowed to a seasonally adjusted 0.2% in the three months top September, as many suspected it would as the impact of the federal government’s stimulus spending dissipated.

That was down on the solid 0.6% quarter on quarter growth recorded in the June quarter.

It is in fact the weakest for this year, after the surprise 0.4% rise in the March quarter.

That left growth for the year to September at 0.5%, down from the 0.6% in the year to June.

The quarterly figure was half the 0.4% median forecast from the market, which had also forecast annual growth of 07%.

The small rise came from a 0.7% increase in household spending and a 6.2% increase in public investment, offset by a 0.9% fall in private investment, and a strong fall in net exports.

The fall in net exports was due to a 2.3% fall in exports and a 5.8% rise in imports and came despite a 1% rise in our terms of trade in the quarter.

The ABS said the industries that provided the main contribution to growth in the September quarter were rental, hiring and real estate services with a 9.9% increase in seasonally adjusted volume terms and construction with a 2.2% increase in seasonally adjusted volume terms.

Non-farm GDP grew 0.3% and Real gross domestic income rose 0.4%.

Like yesterday’s minutes from the Reserve Bank’s December board meetings, these figures (two weeks late because they were being reworked to take account of new bases) are not surprising, and have in fact been overtaken by the strong employment figures for November (and the three months to November); solid retail sales and still growing owner-occupied home lending and construction.

Even though most of the data is for October, the solid rise in car sales for October and November and the solid job growth in both months, are pointing to a much higher rate of activity this quarter.

Annual growth in calendar 2009 will also be much higher because the negative 0.5% growth figure from the December, 2008 quarter drops out. Growth this year could be well over 1.5%, perhaps 1.9%.

There’s a strangely out of date feeling with these figures. “Fiscal fade” was the comment economists used to describe the slowing rate of growth (although the trend rate was a solid 0.5% and perhaps a better indicator of the underlying strength of activity).

But the 0.9% negative contribution from private investment is another example. Private capex was down 3.8% in the quarter, but future spending intentions were up more than 5%. That made the September figures irrelevant (even though they were down, it was still a strong quarter, just not in comparison to June).

Yesterday’s RBA board minutes showed the central bank was alive to the expected slowdown in the September quarter and could also see the shape of a rebound in activity already in the final quarter of the year.

“Members discussed trends in retail spending. Although data for the September quarter had shown a small fall in the volume of sales, and recent liaison suggested mixed trading conditions since then, this had followed very strong growth in the first half of the year, supported by the stimulus payments to households.

“Motor vehicle sales to households in October had been above the low levels seen earlier in the year, and liaison pointed to strong sales in November.

Measures of consumer sentiment remained at very high levels.

So there’s no impact from these figures on the bank’s thinking on interest rates.

But in  a speech today  RBA deputy governor Ric Battellino left a very large hint that rate rises might be fewer in number next year than many thought.

In discussing bank interest rates, he concluded by saying:

“Taking these considerations into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in the normal range, though in the expansionary segment of that range.”

Peter Fray

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