Sydney - Australia's economy is growing at a quarter of the rate of a year ago, sparking fears that a global top performer has joined a slowdown evident in most of the rest of the developed world.

In the three months through the end of June, the gross domestic product (GDP) rose 0.3 per cent, figures from the Bureau of Statistics released Wednesday showed.

It was the slowest GDP growth rate in three years. The culprit was a sharp drop in household consumption, underlined by a 10-per-cent decline in car sales.

Credit growth was the lowest in 20 years with many households hard hit by petrol price increases and trouble keeping up with mortgage payments.

The figures showed the manufacturing industry was struggling but that the resources sector was still galloping along.

It was the prospect of Australia joining Britain, Germany and Italy heading in the direction of recession that prompted the central bank to cut interest rates this week.

The Reserve Bank of Australia on Tuesday cut rates by one-quarter of a per cent to 7 per cent. The move to cheapen the cost of borrowing came after the 
12th-consecutive rate rise since May 2002.

It was the first drop in almost seven years, and more were expected because the central bank said it was confident inflation had peaked. Analysts said they expected rates to be cut again before the end of the year. (dpa)