* Proposed U.S. tariffs "highly regrettable" - RBA's Lowe
* Reprisals against tariff could be very damaging - Lowe
* RBA confident about outlook for domestic economic growth
* Q4 GDP rises 0.4 pct q/q, 2.4 pct y/y, below forecasts
* Growth held back by net exports, but consumption rebounded
By Swati Pandey and Wayne Cole
SYDNEY, March 7 (Reuters) - The head of Australia's centralbank is upbeat about domestic economic growth despite adisappointing end to last year, but fears the spectre of a tradewar calling threatened U.S. tariffs "highly regrettable."
President Donald Trump intends to slap duties on imports ofsteel and aluminium, a pledge that has met with warnings ofretaliation from the rest of the world and spooked financialmarkets. Bank of Australia (RBA) Governor Philip Lowe'scomments on Wednesday come as data showed growth in Australia'sA$1.8 trillion ($1.40 trillion) economy slowed last quarter asbad weather hit exports, although a pickup in spending helped itextend its 26-year run without recession.
Lowe slammed the tariffs on Wednesday at a business summitin Sydney, saying a tit-for-tat move from other countries wouldbe very damaging.
"The recent announcement on tariffs by President Trump washighly regrettable," Lowe said, strong words for a typicallymeasured policymaker. "History shows protectionism is bad."
Australia's export-driven economy relies heavily oninternational trade and capital. It is particularly vulnerableto a U.S.-led trade war, which threatens the outlook for globalgrowth and the demand for commodities.
Those concerns have been reflected in global financialmarkets, with investors dumping shares for the safety of gold,cash, the Japanese yen and Swiss francs.
The Australian dollar AUD=D4 , considered a risky asset,has been volatile since the start of February, losing 3.6percent that month alone.
On Wednesday, it slipped 0.6 percent to go as low as$0.7772, not far from a recent two-month trough of $0.7713. Itwas last down 0.4 percent at $0.7797.
To add to the uncertainty a key advocate for free trade inthe White House announced his resignation on Wednesday, fanningfears Trump would go ahead with tariffs and risk a trade war. to home, Lowe sounded confident about the country'sfuture, saying the economy was moving in the right direction andsignalling the next move in rates was likely up, not down. BUMP
Lowe's confidence rests partly on unexpected strength in thedomestic labour market and a synchronised upturn in globalactivity.
That helped offset a disappointing end to last year withofficial data showing annual economic growth slowed to 2.4percent in the December quarter, from an upwardly revised 2.9percent in third quarter. all economists were as optimistic as Lowe.
"The outlook for business investment is better, butdwellings investment will probably continue to decline andconsumption may weaken again soon," said Paul Dales,Sydney-based chief economist at Capital Economics.
"So while the RBA believes that GDP growth will step up, wethink another year of growth of about 2.5 percent is on thecards," Dales added. "That partly explains why we doubt the RBAwill raise interest rates until late in 2019."
The RBA held rates at a record low 1.50 percent for a 17thstraight meeting on Tuesday as inflation is still below its 2-3percent target band. RBA sees only gradual progress in reducing unemploymentand inflation. As a result, "the Board does not see a strongcase for a near-term adjustment of monetary policy," Lowe said.
The futures market 0#YIB: reacted by pushing back thechance of a rate hike, with a 25 basis-point increase notfully-priced in until May 2019.