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Australia's economy contracted by 0.5% in the September quarter, ending five years of uninterrupted growth.

The slowdown is mainly attributed to cutbacks in spending by businesses, consumers and the government.

This is the first shrinkage in the economy since early 2011.

The mining boom and high demand for Australia's commodities have kept the economy recession-free for the past 25 years.

The Australian dollar fell by half a US cent after the data, to $0.7420.

Some analysts are optimistic the economy will pick up in the near future.

"We don't expect such a big decline next quarter," said Tapas Strickland, an economist with National Australia Bank.

"We would expect GDP to bounce a bit next quarter, so (there is) no risk of recession that might be grabbing some headlines. It plays into the fantasy of rates needing to be cut next year. The numbers today give some credence to that view."

Earlier this week the nation's central bank, the Reserve Bank of Australia (RBA), kept its key lending rate on hold at a record low of 1.5%. The RBA said it was still assessing the impact from rate cuts in May and August this year.