Australia’s economy expanded 1.3% year on year in the fourth quarter, accelerating for the first time since September 2023.
The GDP growth beat expectations of a 1.2% rise from economists polled by Reuters, and also surpassed the 1.1% climb expected by the Reserve Bank of Australia.
The country’s statistics bureau said that growth was “modest” but broad-based, adding that “both public and private expenditure contributed to the growth, supported by an increase in exports of goods and services.”
On a quarter-on-quarter basis, GDP rose 0.6%, beating expectations of a 0.5% rise from a Reuters poll and marking its fastest growth since the third quarter of 2022.
The data comes after Australia’s central bank slashed benchmark rates in its monetary policy meeting last month, marking its first cut in over four years, amid economic sluggishness and easing inflation.
In its Statement on Monetary Policy released last month, the RBA said GDP growth in Australia is expected to pick up over 2025, with private demand expected to grow on the back of an increase in household consumption.
The RBA has forecast a GDP growth rate of 2.4% and 2.3% for 2025 and 2026, respectively.
Headline inflation is expected to climb to 3.7% at the end of 2025, while dropping to 2.8% by the end of 2026, according to the statement.
These figures are based on expectations that the RBA’s benchmark policy rate — or “cash rate” as it is known in Australia — will drop to 3.6% by Dec. 2025, and 3.5% by Dec. 2026.
Australia’s S&P/ASX 200 stock index fell 1.02% after the data release, while the Aussie dollar weakened to trade at 0.6250 against the greenback.
In a note released after the GDP announcement, My Bui, an economist at the Australian financial services firm AMP, said, “While the growth rate is still way below the long-term trend, it marks a turning point for the economy.”
However, she warned that the growth momentum was still fragile, pointing out that government spending contributed to most of the growth, while consumer spending was lifted by promotions.
“In addition, the sustainability of growth is still in doubt as productivity still hasn’t picked up, while rates are clearly still at a restrictive level,” she wrote. “Trade war tensions also pose additional downside risks for the economy this year.”
She said AMP expects the RBA will hold in March, before cutting rates in May.
Source: CNBC