By JAMES GLYNN The Australian dollar came under a fresh wave of selling Wednesday on news of weaker-than-expected economic growth in the first quarter, which reignited talk of further interest rate cuts this year. Government figures Wednesday showed gross domestic product grew by 0.6% in the first quarter from the preceding three months, and 2.5% from a year earlier. The increase extends 21 years of uninterrupted annual growth for the country, a large exporter of raw materials to China and other parts of industrializing Asia. Economists had expected a 0.7% quarterly rise and a 2.7% annualized increase. A fast cooling resources investment boom dragged on activity in the quarter, but economists said there were clear signs that the economy was finding alternative drivers of growth in the form of rising exports and stronger consumer spending. Still, Treasurer Wayne Swan said the transition from one driver of growth to the other would not be seamless, especially with the Australian dollar still at historically high levels. "There is still some patchiness in parts of the economy. That's not surprising given the strength of the Australian dollar and the gradual transition towards non mining sources of growth. This transition was never going to be seamless," he told reporters in Canberra. The currency was last buying US$0.9601 compared with US$0.9680 late Tuesday. It traded as low as US$0.9591 after the data. The Australian dollar has fallen around 6% since the start of May amid talk that the U.S. was nudging closer to scaling back economic stimulus, and signs China's economy has slowed. The soft reading on economic growth sparked talk that the central bank will need to cut interest rates again before the end of the year. "Whichever direction you turn, the Australian dollar just looks like a sell at the moment. The underlying fundamentals look weak," said Stan Shamu, strategist at IG Markets. The Reserve Bank of Australia, or RBA, has cut interest rates seven times in the last 20 months to stoke the 80% of the Australian economy that is not mining related. The benchmark cash rate fell to a record low of 2.75% at the start of May. The RBA left interest rates steady at a policy meeting this week, but kept the door wide open to more cuts should the economy slow in coming months. "Clearly the Reserve Bank is forward looking and there are good reasons for the Bank to maintain an easing bias given the downside risks to domestic growth," said Savanth Sebastian, economist at CommSec. Expectations that the Australian dollar has further to fall remained high. Stephen Jen, a partner at London-based SLJ Macro Partners, said the Aussie dollar ranked alongside emerging market currencies as being in "grave danger" of a big correction lower. "If China decelerates, the 'truth will be revealed,'" he said in a note to clients. Elsewhere, Charlie Aitken, a director at Bell Potter, a Sydney-based brokerage said the Aussie dollar's fall could become disorderly. "The Australian dollar has been one of the most obvious bubbles in the financial world," he said.

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