A surprise fall in company inventories looks set to shave 1 percentage point off December-quarter GDP growth, increasing the likelihood of the first quarterly economic contraction since the COVID-19 pandemic.

Destocking by private sector companies, partly in response to weaker demand, led to a 1.7 per cent decline in inventories in the three months to December, the Australian Bureau of Statistics said on Monday. The outcome was a large fall by historical standards and far sharper than the market expectation for no change in inventory levels.