Following on from Wednesday's soft retail sales data for the September quarter, Thursday's monthly international trade report suggests exports will again be a drag on growth domestic product (GDP) when the national accounts are released next month.
Treasurer Wayne Swan reiterated that the economy will operate below capacity for some time despite this week's mid-year budget review forecasting a rosier outlook than predicted in May.
But opposition finance spokeswoman Helen Coonan said the government was pumping too much stimulus into the economy at a time when interest rates were on the way up.
Australia posted its largest monthly international trade deficit in 18 months in September.
The trade balance of goods and services grew to a seasonally-adjusted $1.849 billion deficit in September, after a revised $1.651 billion shortfall in August, Australian Bureau of Statistics data showed.
Although economists were expecting a larger deficit of $2.15 billion in September, it was still the fifth straight month of deficits.
"While net exports will still detract from growth, the trade deficit was smaller than we had been anticipating and reduces the risk of a negative September quarter GDP print in mid-December," RBC Capital Markets senior economist Su-Lin Ong said.
"At this stage, GDP looks like it could post a flat to possibly small positive in the quarter."
The growing trade gap came as both imports and exports grew by five per cent in September from August.
Ong said the rise in imports highlighted the resilience of domestic economy, while a firmer global backdrop may have lent a helping hand to the rise in exports in the month.
Treasurer Swan told a conference in Melbourne that Treasury had estimated that private business investment is set to be around $42 billion lower through the downturn as a consequence of the global recession.
Business investment would drop 6.5 per cent, its sharpest fall since the early 1990s, company profits would shrink by 3.5 per cent and annual export income would plummet by 19.5 per cent.
"It's for all of these reasons that the government has judged that the planned gradual withdrawal of fiscal stimulus remains appropriate."
But Senator Coonan said the Reserve Bank of Australia's (RBA) decision to raise the cash rate for a second time in as many months was the clearest sign that there is too much stimulus in the economy.
She said the RBA had "moved on ... and yet you have the government ... still behaving as though they are saving the furniture, still pumping billions of dollars into the economy in circumstances where interest rates are now on the march."
Source: AAP NewsWire