UPDATE 12.35pm: Company profits fell for the fifth consecutive quarter and will weigh on Australia's economic growth and put further pressure on the federal budget.
Company gross operating profits were down 1.0 per cent in the December quarter and fell 7.6 per cent over calendar 2012, Australian Bureau of Statistics (ABS) figures show.
Commonwealth Bank chief economist Michael Blythe said the fall in profits would have detracted from economic growth during the quarter.
The ABS will release its gross domestic product (GDP) figures for the December quarter on Wednesday.
Mr Blythe said the fall in profits would put the Federal Government's budget under further strain.
“What the figures are suggesting is that the nominal side of GDP figures is going to be reasonably weak, mainly because of lower company profits on the back of lower commodity prices,” he said.
“That is important because it drives things like government tax revenues, for example, so it highlights the pressure the budget is under,” he said.
JP Morgan economist Tom Kennedy said the company profits data was a mixed result across the different sectors.
“Profits in the mining sector were once again a significant drag on the headline release, falling a further 3.7 per cent quarter on quarter on the back of lower key commodity prices,” he said.
“Today's weak company profits outcome is consistent with the anticipated deceleration in growth during the second half of 2012, a byproduct of an operating environment that remains challenging for many domestic firm.”
St George chief economist Hans Kunnen said he was surprised that company profits fell only one per cent in the December quarter, especially after many mining companies cancelled projects in the second half of 2012.
“I was fearing worse, one would prefer it to grow but to only decline one per cent in a softish period with mining going through some issues, that's not a bad outcome.”
Mr Kunnen said he originally forecast that the next central bank interest rate cut would be in April, but on Monday changed his prediction to June.“The figures aren't soft enough to generate concern,” he said.
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