Australia's economic growth has slowed to its weakest pace in almost eight years and there are concerns that weak housing investment and consumer spending will prevent a swift improvement.
Growth of 0.3 per cent in the March quarter took the annual rate of growth to 1.7 per cent, data from the Australian Bureau of Statistics showed on Wednesday, and Australia has now gone 103 quarters, or more than 25 years, without a recession.
The numbers are slightly better than the 0.1 per cent quarterly growth forecast by economists, and the 1.4 per cent predicted for the year to March, and pushed the Australian dollar higher.
They also settled, for now, speculation about the central bank potentially cutting interest rates.
Growth was impacted by bad weather, which restricted commodity shipments and housing construction, and Cyclone Debbie's impact on exports and construction is likely to carry over into the June quarter.
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However economists warn the data points to a broader economic slowdown.
"Some of the main growth drivers of the economy in recent years, including residential dwelling investment and exports, reversed in the March quarter," St George senior economist Jo Horton said.
"Dwelling investment, which has supported the transition from mining investment-led growth, is close to a peak and its role of support for economic growth is likely to fade later this year."
There was a 4.4 per cent drop in dwelling construction, a three per cent fall in spending on machinery and equipment and a 2.7 per cent contraction in government spending.
Household consumption grew by 0.5 per cent in the March quarter, down from 0.9 per cent growth in the preceding three months, and exports fell 1.6 per cent in the quarter.
There was a pickup in business investment, indicating the sharp decline in mining investment is almost done.
However, wage growth continued to be anaemic, resulting in households running down their savings. The household savings rate slipped to 4.7 per cent in the quarter, and is now down more than 2 percentage points over the last 12 months.
"The wage, consumption, and household savings dynamics remain worrying. Highly indebted Australian households continue to save less to fund expenditure," Royal Bank of Canada economist Su-Lin Ong said.
On Tuesday, the Reserve Bank of Australia stuck to its long-term forecasts, saying it expects economic growth to increase gradually to above three per cent over the next couple of years.
Economists said this is likely too optimistic given the slowdown in the economy, coupled with the impact of unemployment and a weak outlook for wages growth.
ANZ senior economist Felicity Emmett said persistently weak wages growth will mean inflation remains under control.
"In our view, this will leave the RBA on hold for the foreseeable future," she said.
