Prime Minister Kevin Rudd says that, The Australian economy still persists to be the "envy" of the developed world.

A senior Treasury official has warned that debt problems in Europe, pose the biggest threat to Australia's economic performance

The national accounts released on today showed gross domestic product (GDP) grew by 0.5 % in the March quarter.

This was weaker than some economists had forecast, and was a marked step-down from the previous quarter that was upgraded to a 1.1 per cent increase from 0.9 % originally.

At an annual growth rate of 2.7 %, Mr. Rudd told Parliament, that the economy had continued to perform superior than other chief economies, and has done so since the global financial crisis began two years ago.

"The Australian economy ... continues to be the envy of the developed world", he said. But he admitted that many families and small businesses were still finding it "very tough" given the nature of the economic forces that were impacting on the local economy.

Government spending proved the major prop for growth in the three months to March, contributing 0.7 percentage points to GDP, followed by household consumption adding 0.3 percentage points.

The largest negative was a 0.6 percentage point contraction from business capital investment, while net exports - exports less imports - subtracted 0.5 percentage points.

Following the monthly board meeting, The Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.5 % saying current policy was "appropriate for the near term".