Australia heading towards recession

Australia's economy contracted by 0.5% in the last quarter of 2008, the government said, in an unexpected announcement that suggested the country may be entering a recession.

The news surprised economists and analysts who had expected the Australian Bureau of Statistics to report a slight increase in GDP. But the bureau said the GDP fell by 0.5% in the last quarter in seasonally-adjusted terms.

Australia is not yet in a recession - technically two quarters of negative growth - because a narrow rise of 0.1% was reported in the third quarter. For the year, the economy expanded 0.3%, the ABS reported.