The relief, though, may be temporary as the main contribution to growth was from shrinking imports (adding 1.6 percentage points), not typically a sign of a robust economy. The main drag was business investment (shaving 1.1 points), a signal that the outlook for jobs is likely to darken further. ''We've dodged the recession bullet for the time being, but in reality we've had five quarters of sub-trend growth and unemployment has gone up in that period,'' Commonwealth Bank chief economist Michael Blythe said. ''So while we might not be officially able to tick off recession, to all intents and purposes, we are there.'' The GDP figures come a day after the Reserve Bank left interest rates on hold at 3 per cent, with Governor Glenn Stevens warning the economy was ''contracting'' and that the central bank would slash rates further ''if needed.'' The national accounts figures were ''stronger than the RBA was expecting, and it's reinforcing that 'on-hold for the time being' message,'' Mr Blythe said.

Investors, though, liked the news that Australia was not joining the list of countries in recession - for now at least. The dollar jumped a quarter of a US cent to 82.2 US cents. Australian stocks also gained on the news, extending their advance for the day to 0.8 per cent. By state, NSW's demand eased 0.2 per cent in the first quarter, seasonally adjusted. Victoria slumped 2.1 per cent in the quarter, while Queensland's fell 3.1 per cent. Western Australia's demand slumped 2.3 per cent, while Tasmania's fell 2.5 per cent. I don't think we're out of the woods yet Trade numbers for the March quarter yesterday threw many economists' models out of whack.

A 2.7 per cent jump in exports alone added 0.6 percentage points to quarterly growth. Combined with a 7 per cent fall in imports, Australia's current account deficit narrowed to $4.6 billion from $6.5 billion in the fourth quarter of 2008. Excluding the farm sector, the economy grew by 0.5 per cent in the first quarter. On a year-to-year basis, the overall growth rate was 0.4 per cent. The December quarter year-on-year growth rate was revised up, to 0.8 per cent, from 0.3 per cent. The economy is yet to gain the full benefit of Federal Government spending, totaling about $52 billion before last month's budget.

Rate cuts from the central bank - which have more than halved the official rate since September - are also yet to flow through fully. Mortgage holders have saved about $1000 a month as banks passed on most of the rate cuts.

Indeed, household final spending added 0.3 percentage points to the quarterly growth tally, as families spent some of the government largesse.

Not out of the woods

Against those positives, though, are several major drags on demand, particularly from businesses that have postponed or cancelled projects.

''I don't think we're out of the woods yet," said ICAP economist Adam Carr. ''I still think the unemployment rate is going to rise but the data suggest the unemployment rate will be more modest."

Still, the numbers suggest ''the economy is markedly healthier'' than originally expected.

Today, data from Federal Chamber of Automotive Industries showed car sales dropped 15 per cent in the year to May, an improvement from the 24 per cent fall in the year-to-April figure, but still well within negative territory. Today, data from Federal Chamber of Automotive Industries showed car sales dropped 15 per cent in the year to May, an improvement from the 24 per cent fall in the year-to-April figure, but still well within negative territory.

Also, initial reports from David Jones and Myer's half yearly clearance sales, suggest they have received a lukewarm reception from bargain hunters. Other definitions of a recession exist, accounting for the slowdown Australia is experiencing.

The National Bureau of Economic Research in the US defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."

Australia's economy continues to outpace most of its rivals. The US economy shrank by 2.5 per cent in the year to March, while the euro zone contracted 4.6 per cent year-on-year. Japan was one of the worst performers, with GDP withering by 9.7 per cent over the same period.

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