Australian GDP growth 0.6% in Q2

The Australian economy expanded by 0.6% in the June quarter, seeing momentum lift from a subdued March quarter (0.3%) to outpace expectations (0.5%). Year-ended growth firmed from 1.4% to 1.8%, coming in above the RBA's recently downgraded view (1.6%). This together with household consumption finally showing signs of rediscovering form point to the RBA's easing cycle continuing to proceed at a gradual pace. Inflation is not standing in the way of further cuts either; nominal GDP growth running at 4.1%Y/Y means this is an economy where inflation is in the 2s - consistent with the RBA's target band.   

The key theme in the domestic economy in the June quarter was household consumption picking up to rise at its fastest pace (0.9%) since the December quarter of 2022; finally showing signs of responding to the slowing in inflation, rising real incomes and RBA rate cuts. This largely drove growth as business investment contracted (-0.4%) and dwelling investment was subdued (0.4%). Modest and offsetting contributions meant that net exports (+0.1ppt) and inventories (-0.1ppt) were growth neutral in the quarter. 

The 0.9% lift in household consumption saw year-ended growth rise from 0.8% to 2%, a 2-year high. Discretionary consumption (1.4%) in particular was the key area of strength. This was supported by end-of-financial-year sales, new product launches, and by holiday-related spending due to the close timing of public holidays for Easter and ANZAC day, with events, hotels, cafes and restaurants and transport services benefitting. A reduction in the household saving ratio from 5.2% to 4.2% as well as real incomes rising at their fastest pace in 4 years (4.2%Y/Y) - the result of easing inflation - were key factors behind the lift in consumption growth.  

More to come. 

Australia Current Account -$13.7bn in Q2; net exports 0.1ppt

Australia's current account deficit remained at around 2% of GDP in the June quarter. Export revenue was held flat - despite underlying volumes rising (1.7%) - as uncertainty around global trade caused by the US administration's tariff regime weighed on commodity prices. Expenditure on imports meanwhile rose 0.8% in the quarter. Overseas travel underpinned a pick-up in import volumes (1.4%) while import prices eased (-0.7%). The overall dynamics are broadly neutral for GDP growth in the June quarter, with net exports to add just 0.1ppt.   

Australia's current account - the nation's position on trade and financial transactions with the rest of the world - remained in deficit for the 9th consecutive quarter. Effectively, more capital has flowed out of Australian than has come in over this period - a factor that has contributed downward pressure on the Australian dollar, which in trade weighted terms is down more than 1.5% since the end of the June quarter 2023. In nominal terms, the current account deficit was $13.7bn (around 2% of GDP), narrowing slightly from a deficit of $14.1bn in the March quarter.

Australia actually runs a surplus on its trade in goods and services with the rest of the world, though it narrowed in this latest quarter from $4.3bn to $3.1bn. However, the nation has an income deficit: payments to overseas investors (dividends, interest payments etc) exceed returns earned by domestic investors offshore. That deficit narrowed in the June quarter to $16.8bn from $18bn - a $1.2bn improvement that offset the reduction in the trade surplus, leaving the current account deficit little changed.    

Export revenue was flat at $164bn in the quarter (1.9%Y/Y) - that was despite the volume of goods and services exported rising at a decent clip of 1.7%, its fastest rise in 2 years. Higher volumes were supported by resources (2%), rural goods (1.7%) and services (3.3%) on the back of strong inbound travel (4.8%). However, despite strength in demand for Australian exports, the prices of those exports fell overall by 1.7% in the quarter; declines in commodity prices were a key factor. 

Import spending rose in Q2 by 0.8% to $160.9bn (4.9%Y/Y). That movement was driven by a lift in demand, with import volumes advancing by 1.4% - the strongest increase since Q1 2024 - against a 0.8% decline in import prices. In volume trade, services (3%) was the key driver of strength, with offshore travel up 3.5%. Goods imports lifted 0.8% on the back of consumption goods (3.5%), reflecting import orders for vehicles (6.3%), clothing and footwear (7.2%), and leisure goods, toys and books (7.9%). Non-monetary gold (37.7%) was also a factor amid volatility on global markets.

Following today's report, the ABS has put the contribution from net exports to GDP growth in the June quarter at a broadly neutral 0.1ppt. The US administration's tariffs have led to significant volatility in global trade flows, with resulting impacts on GDP growth. That, however, has not been the case in Australia. 

Australian dwelling approvals down 8.2% in July

Australian dwelling approvals posted a larger-than-expected fall of 8.2% in July, mostly reversing their strong rise in June (12.2%). Approvals were forecast to only come back by 5% for the month. The retracement was all in the higher-density segment (-18.8%) as detached approvals (0.6%) rose for the first time since April. Higher interest rates and capacity pressures within the construction sector are clearly not new headwinds but still seem to be holding back approvals. 

National dwelling approvals came in at 15.8k in July after falling 8.2% from their 34-month high in June (17.2k). Despite this latest result, approvals have seen a turn in momentum after being on the slide earlier in the year. Strength in the higher-density segment has been the key factor, with approvals working their way up to average 16.1k over the past 3 months.   

Detached or house approvals have consistently come in around 9-9.5k per month so far in 2025. By contrast, higher-density approvals have been highly volatile, falling as low as 5.4k in April before surging to a high of 7.8k in June. The available estimates show that the high-rise segment has been the most volatile as approvals for townhouses and in the low-rise segment have climbed.

Alteration approvals show no sign of easing up rising 1.9% to a new record high ($1.25bn) in July. The higher cost of alterations has been a factor in the rise, but the fact that approvals for new dwellings have struggled suggests there has also been a preference shift within the market. More insights on the volume of alteration work will come to hand in Wednesday's National Accounts for the June quarter.