Australia's economy slowed in the first three months of the year as the Reserve Bank's aggressive policy tightening weighed on household spending and construction, while accelerating labor costs underlined the nation's inflation challenge.

Gross domestic product advanced 0.2% from three months earlier, coming in below economists' estimates for a 0.3% gain, Australian Bureau of Statistics data showed Wednesday. From a year earlier, the economy grew 2.3%, slowing from a downwardly revised 2.6%. 

The result is unlikely to surprise policy makers who are predicting a substantial economic slowdown over the coming year driven by 12 rate increases since May 2022, with the latest coming just a day ago. 

The weakest quarterly result since the third quarter of 2021 sent Australian government bond yields lower.

Wednesday's report showed the household savings ratio fell further to 3.7% from 4.4% three months earlier as Australians tapped cash they had built up during the pandemic to fund consumption. Labor costs accelerated to 2.4% in the first three months of the year, driven by the public sector and higher than usual end of year bonuses.

Household spending rose 0.2% in the first quarter, adding just 0.1 percentage point to growth.

Source : Bloomberg