By Candice Zachariahs Dec. 3 (Bloomberg) -- The Australian and New Zealand dollars fell after a report showed Australia’s economy grew at its slowest pace in eight years in the third quarter. The currencies also declined as the Reserve Bank of New Zealand is forecast to lower borrowing costs tomorrow by a record 1.5 percentage points. The Reserve Bank of Australia slashed interest rates 1 percentage point yesterday after the global financial crisis tipped the world into a recession. “Given the declines in confidence surveys and also the fact that credit growth has eased quite sharply, I’d expect the domestic economy to weaken further” in Australia, said Sharada Selvanathan, a currency strategist at BNP Paribas SA in Hong Kong. “In the medium-term we remain bearish on the Aussie,” she said, referring to the currency by its nickname. Australia’s currency traded down 0.1 percent at 64.45 U.S. cents as of 4:21 p.m. in Sydney from 64.52 cents late in Asia yesterday. The currency was little changed at 60.07 yen. New Zealand’s dollar fell 0.9 percent to 52.93 U.S. cents from 53.39 in Asia yesterday. It bought 49.34 yen from 49.72. The Australian dollar will trade between 60 and 69 U.S. cents towards the end of this year, before weakening towards 50 U.S. cents in 2009, Selvanathan said. Australian Economy Australian gross domestic product rose 0.1 percent from the second quarter, when it gained 0.4 percent, the Bureau of Statistics said in Sydney today. The median estimate of 22 economists surveyed by Bloomberg was for a 0.2 percent gain. The economy grew 1.9 percent from a year earlier. Industrialized nations including the U.S., Japan and the 15 European nations that use the euro have slipped into recession as investment and consumption slowed amid the credit crunch that started in the middle of last year. Policy makers in New Zealand, which is also in recession, will cut the benchmark interest rate to 5 percent at 9 a.m. tomorrow in Wellington, according to 11 of 17 economists surveyed by Bloomberg News. Six say Governor Alan Bollard will lower the rate by 1 percentage point. “The overriding trend is still clearly downwards,” said Imre Speizer, a market strategist in Wellington with Westpac Banking Corp. The currencies will trade with a “weak tone” today, with the Australian dollar buying between 63.30 and 65 U.S. cents, and New Zealand’s currency trading in a range of 52.5 to 53.5 cents, he said. Australia is New Zealand’s biggest trading partner. Higher interest rates, compared with 0.3 percent in Japan and 1 percent in the U.S., have attracted investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits. Bonds, Swaps Australian government bonds advanced. The yield on the 10- year note fell one basis points, or 0.01 percentage point, to 4.33 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.092, or A$0.92 per A$1,000 face amount, to 107.554. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.87 percent. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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