Australia's GDP expanded 0.2 percent on the quarter in the three months to December, down from the revised 0.3 percent increase recorded in the three months to September. This is the weakest quarterly growth in five quarters and was also below the consensus forecast for an increase of 0.3 percent. GDP rose 1.5 percent on the year in the three months to December, down from growth of 2.1 percent in the three months to September.

Slower quarter-over-quarter headline growth reflects weaker domestic demand. Consumer spending rose 0.2 percent on the quarter in the three months to December after an increase of 0.4 percent in the three months to September. Private investment also recorded weaker growth, increasing 0.7 percent after advancing 1.1 percent previously, while government spending rose 0.6 percent on the quarter after a previous increase of 1.1 percent. Net trade made a positive contribution to headline GDP growth of 0.6 percentage points after a negative contribution of 0.6 percentage points previously, though this largely reflected a sharp decline in imports.

Today's data cover the period in which officials at the Reserve Bank of Australia delivered another increase in official policy rates in December after they had been left on hold over the previous quarter. At their latest meeting, held early February, officials left rates on hold again but advised that they could not rule out further rate increases. Today's data, however, suggest that previous policy tightening is continuing to weigh on demand and may prompt some shift in the RBA's guidance at its next meeting later this month.

Fourth-quarter GDP is expected to rise a quarterly 0.3 percent for year-over-year expansion of 1.4 percent. Third-quarter respective results were growth of 0.2 and 2.1 percent as consumer spending was flat and private investment strong.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy and is usually released early in the third month after the reference period.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. These data, which follow the international classification system (SNA93), are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower.