Petrol prices dampen Australian economy

Australia's economy has been dampened by high petrol prices and the effects will flow on into next year, Prime Minister John Howard said today.

Australian Bureau of Statistics data released on Wednesday showed Australian gross domestic product grew 0.2 per cent -- compared with market forecasts of 0.5 per cent -- during the three-months to end-September and 2.6 per cent on the year.

"Clearly the economy's performance has been dampened a little by the high petrol prices. They have retreated a bit, they are still much higher than they were a year ago," Howard told Australian radio.

Asked how petrol prices would affect the economy next year, Howard said: "I think it probably means that it will not grow at quite the rate it might otherwise have grown."

"However there is a capacity for the consumers to adjust to higher prices ... after a while they get used to it and they start spending in other areas again and if that is accompanied by some retreat in the increase (in petrol prices) then things recover."

During the September quarter, crude oil prices topped US$70 a ($101) a barrel for the first time, lifting local petrol prices to around A$1.40 ($1.51) a litre from around A$1.00 early in 2005. Petrol prices are currently around A$1.13.

The extra cost of petrol means households have less money to spend on non-essential items in an economy where retail sales make up 60 per cent of consumption.

In its May budget the government forecast gross domestic product to grow 3.0 per cent in fiscal 2005/06.

- REUTERS