Agriculture is a rare bright light in a fast dimming economy, with national growth slowing sharply in the September quarter, validating the Reserve Bank's decision to wind back three years of interest rate rises in a little over three months.
Gross domestic product grew by 0.1pc, seasonally adjusted, in the three months to September, down from a revised 0.4pc gain in the June quarter, the Australian Bureau of Statistics reported.
But non-farm GDP contracted 0.3pc quarter-on-quarter, with the re-emergence of drought of some farming sectors masking the overall economic picture.
The result was the weakest pace since December 2000. Analysts expected a 0.2pc increase for the quarter.
- Economy slowed sharply in Sept. quarter
- GDP up by 0.1pc, weakest since Dec. 2000
- Service sector activity hits record low
"Growth is anaemic. It's just limping over the line into positive territory," said Matt Robinson of Moody's Economy.com.
"Looks like we're perilously close to a recession now.
"And the third quarter is as good as it gets for the next four quarters."
At an annualised rate, growth for the July-September period came in at 1.9pc, weaker than a revised 2.9pc rise for the June quarter.
The yearly outcome matched analysts' forecasts.
Despite the negative number, Treasurer Wayne Swan said the data was positive for Australia given the impact from the global financial crisis.
"Something like two-thirds of OECD economies are expected to contract in 2009," he said.
"So while other economies are contracting, our economy continues to grow."
The Reserve Bank yesterday sliced one percentage point from its key cash rate to 4.25pc in its latest bid to avert a recession.
The move brought the cuts since September to three full percentage points, as the RBA changed tack.
Investors are pricing in a further cut of about 75 basis points when the RBA's board next meets in February, according to Credit Suisse figures out today.
The dollar was recently buying US 64.45 cents, about a quarter of a US cent down since the data was released.
Shares fluctuated in volatile trading, moving in a range of about 4pc, before ending the day virtually flat.
Jobs worry
Some economists say the economy has already lurched into reverse - joining almost all rich economies.
The European Union and Japan sank into recession earlier this year while the US has been in one for a year, according to a report out this week.
The slowdown, though, is yet to generate major job losses even though companies ranging from Holden to Boeing and Fairfax Media (publisher of this website) have already started shedding staff to cope with sagging demand.
"Slowing in job growth and eventual shedding of labour is inevitable," said RBC Captial Markets senior economists Su-Lin Ong.
"The unemployment rate will rise to at least 6.50pc over the next 12 months."
Analysts at JPMorgan predict unemployment will double from its current 4.3pc rate to 9pc by 2010 even as governments at all level increase spending to create jobs.
Today's GDP figures, though, showed demand for workers remained strong to the end of September.
"In the September quarter 2008, seasonally adjusted compensation of employees grew by 2.2pc, and the seasonally adjusted number of employees...grew by 0.4pc," the ABS said.
Average pay per employee grew 1.7pc, the bureau said.
Imports, building drag
Among the main drags on the economy were imports, which sapped 0.4 percentage points from the quarterly figures.
New buildings also turned negative, lopping 0.1 percentage point from the figures.
On the plus side, engineering investment - largely linked to the mining boom - added 0.4 percentage points, while public spending on fixed assets added half that tally.
For Mr Robinson of Economy.com, though, the overall view is negative.
"Looking at the breakdown, non-farm GDP contracted 0.3pc quarter-on-quarter," he said.
"That reinforces the gloomy outlook for the economy - if we're not already in recession, it certainly feels like it."
By industry, agriculture, fishing and forestry added 0.3 percentage points to the GDP as parts of rural Australia emerged from drought.
Construction contributed 0.1 percentage points.
Property, finance and insurance, linked to slumping asset values and losses from the global financial crisis, deducted 0.1 percentage point out of the GDP growth.
The terms of trade, a gauge of export prices against import prices, rose 5.6pc, a result unlikely to be repeated in the near term as prices for iron-ore, coal and other commodities have plunged in recent months.
NSW leads, Victoria lags
State data tossed up a few surprises, with New South Wales clocking up the fastest quarterly growth pace among major states while Victoria went backwards as commercial construction fell.
NSW contributed 0.2 percentage points to the domestic final demand, seasonally adjusted, while Victoria subtracted 0.3 percentage points and Queensland lopped off 0.1 percentage point.
Still buoyed by growth in the mining industry, Western Australia added 0.2 percentage points.
In seasonally adjusted terms, Tasmania enjoyed the biggest boost in commercial construction, gaining 28pc in the September quarter, while Victoria dropped nearly 10pc over the same period.
Services hit bottom
Other data out today pointed to economic weakness extending to the current quarter.
Activity in the service sector, the largest component of the Australian economy, shrank to its lowest level on record in November in another sign of the scale of the slowdown hitting businesses.
The Australian Industry Group-Commonwealth Bank of Australia performance of service index fell 4.3 points to 37.8 points in November , the weakest reading since the monthly series began in 2003.
Among other economies, the US economy shrank 0.5pc in the September quarter, as did Germany's, while Japan's economy contracted 0.1pc.
By contrast, Mr Robinson said Australia's performance was still "a positive result".
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