Australia’s economy expanded faster than expected in the fourth quarter, reinforcing concerns that domestic demand may still be running hotter than the RBA would like. GDP grew 0.8% qoq, beating forecasts of 0.7% and accelerating from the previous quarter’s 0.5% pace. On an annual basis, growth came in at 2.6% yoy, also above expectations of 2.2%.
The expansion was broad-based, with output rising in 17 of the economy’s 19 industries. Both public and private demand contributed equally to the result, each adding 0.3 percentage points to overall growth. Household activity also showed resilience, with discretionary spending increasing 0.4% during the quarter, helped by strong retail events such as Black Friday.
At the same time, households continued to rebuild financial buffers. The saving ratio climbed to 6.9%, the highest level in more than three years, while per capita GDP rose 0.9% yoy — its strongest reading since 2022.
The strength of the data places the RBA in a difficult position. Just a day earlier, Governor Michele Bullock warned that demand may be outpacing the economy’s capacity. The GDP figures appear to reinforce that view, suggesting the current 3.85% cash rate may not yet be restrictive enough to cool activity.
