The March quarter national accounts showed the economy grew by 0.8 per cent, a marked slowdown from the upwardly revised 3.6 per cent increase in the December quarter when the Delta variant lockdowns ended.
This resulted in an annual growth rate of 3.3 per cent.
The economy had to navigate the spread of the COVID-19 Omicron variant in early 2022, as well as floods along the east cost of Australia.Â
"Household consumption weathered the Omicron disruption quite well," BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said.
However, looking ahead he said higher interest rates and the fast pace of inflation would squeeze budgets and restrain growth in consumption.
The Australian Bureau of Statistics said government spending was also one of the main drivers of growth in the March quarter.
But Mr Langcake said net exports weighed heavily on the growth result, with a surge in imports compounding a slight fall in exports.
Imports of goods and services jumped 8.1 per cent, the largest rise since December 2009, the ABS said.
This resulted in net exports detracting 1.5 percentage points from growth.
Economists doubt a modest expansion in the first three months of 2022 will stand in the way of the Reserve Bank of Australia raising the cash rate by a further 25 basis points when its board meets next week.
Barclays economists expect the cash rate to steadily rise to 1.75 per cent by the end of the year, compared with 0.35 per cent now, with a further hike to two per cent in the early stages of 2023.
Meanwhile, growth in Australia's manufacturing sector in the early months of 2022 came to an abrupt halt in May, due to supply constraints, labour shortages, rising prices and wage growth.
The Australian Industry Group performance of manufacturing index fell by 6.1 points to 52.4 points, just above the 50-point mark that separates expansion from contraction.
The decline in May followed three months of consistent acceleration.
"There are mixed messages about the immediate outlook with new orders continuing to rise, but with many manufacturers expressing concern about the prospects of sharp energy price rises in the months ahead," Ai Group chief executive Innes Willox said on Wednesday.
"Manufacturers continue to report supply constraints and labour shortages as the leading sources of concern and they reported still higher input costs and a lift in wages growth in May."
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