Australia's economy grows by less-than-expected 2% yoy in Q2

People walking past the Reserve Bank of Australia in Sydney on Sept 1, 2015.
People walking past the Reserve Bank of Australia in Sydney on Sept 1, 2015. PHOTO: AFP

SYDNEY (AFP) - Australia's economy expanded at its slowest quarterly pace for more than two years as mining and construction activity fell and exports declined, data showed Wednesday (Sept 2), hit by weakening growth in its biggest trading partner China.

Economic growth expanded by a slower-than-expected 0.2 per cent in April to June, taking the annual rate of expansion to 2.0 per cent.

The latest figures, which follow strong 0.9 per cent growth in the first quarter, were softer than analysts' expectations of June quarter growth of 0.4 per cent for year-on-year growth of 2.2 per cent.

The Australian dollar, which was hovering around 70 US cents early Wednesday morning, briefly slipped by half a US cent to 69.95 US cents.

"It's a twisted economy right now," the National Australia Bank senior economist David de Garis told AFP.

"It is making some economic progress, but in a still-difficult environment.

"We know the economy has been growing slower as the resources sector has slowed down and of course the terms-of-trade effect on income growth as well."

Mining production "fell significantly" by 3.0 per cent for the quarter, although growth through the year was 2.1 per cent, the statistics bureau said, adding that the weaker data came as exports also fell.

Net exports detracted from GDP growth by 0.6 percentage points for the three months.

In positive news, household spending supported growth, lifting by 0.5 per cent for the period while government expenditure jumped 2.2 per cent.

Australia has struggled to transition away from mining-driven growth fuelled by an unprecedented boom in resources investment.

The economy has avoided recession for more than two decades, but over the past year has seen non-mining industries fail to fill the gap left by the resources sector.

The Reserve Bank of Australia Tuesday kept interest rates at a record-low 2.0 per cent to support growth, while the unemployment rate has stayed around a decade-high of 6.0 per cent over the past few months.