Australia’s economy grew slightly faster than expected in June quarter, with GDP growth rising from 0.3% to 0.4% q/q, above 0.3% consensus. Annual growth nevertheless slowed from 2.5% to 2.1% y/y, but comfortably exceeded 1.8% expected. ABS described growth as “subdued”, noting households remained cautious even as pockets of private demand provided support.
Domestic final demand contributed 0.3 percentage points to quarterly growth, including 0.2ppt from household consumption and 0.1ppt from public demand. Household spending rose 0.4%, but strength was narrowly concentrated: discretionary consumption increased 1.4%, with nearly half of that rise coming from vehicle purchases as electric and hybrid sales surged. Essential spending fell 0.3%, while private investment was flat. Net trade added 0.1ppt, its first positive contribution since December quarter 2023, while inventories deducted 0.1ppt.
Price and labour-cost details were less comfortable. Domestic final demand deflator accelerated from 0.5% to 0.8% q/q, with ABS pointing to higher input costs from Middle East-driven oil increases. Compensation of employees rose 1.5%, real unit labour costs increased 0.9%, while GDP per hour worked was flat on quarter and down 0.2% y/y. Terms of trade also fell 1.6% as higher fuel, fertiliser, plastics and freight costs lifted import prices.
For RBA, report is mildly hawkish at margin. Growth remains subdued and household demand far from broad-based, but economy performed better than expected while domestic cost pressures showed little relief. Combined with July’s sticky trimmed-mean and services inflation and RBA’s stated willingness to tighten pre-emptively if upside risks crystallise, GDP data remove another argument for patience rather than creating a standalone case for September hike.
Data Summary
| Indicator | Q2 | Previous | Consensus |
|---|---|---|---|
| GDP q/q | 0.4% | 0.3% | 0.3% |
| GDP y/y | 2.1% | 2.5% | 1.8% |
| Domestic final demand contribution | +0.3ppt | ||
| Net trade contribution | +0.1ppt | ||
| Inventories contribution | -0.1ppt |
Key Takeaways
- Australia GDP growth picked up from 0.3% to 0.4% q/q, beating 0.3% consensus.
- Annual growth slowed from 2.5% to 2.1%, but remained well above 1.8% expected.
- Household consumption rose 0.4%, although discretionary strength was concentrated heavily in electric and hybrid vehicle purchases.
- Domestic final demand contributed 0.3ppt to growth, while net trade added 0.1ppt and inventories subtracted 0.1ppt.
- Cost pressures remained firm: domestic final demand deflator accelerated from 0.5% to 0.8%, compensation of employees rose 1.5%, and real unit labour costs increased 0.9%.
- For RBA, stronger-than-expected growth alongside persistent domestic costs adds modest support to hawkish case, particularly after recent sticky underlying inflation and willingness to tighten pre-emptively.
