Australian economic growth slowed to 0.4% in the September quarter, defying expectations to match its 0.7% pace in the June quarter. The outcome is stronger than today's miss implies. Domestic demand accelerated at its fastest pace since Q2 2023 (1.2%), with inventories (-0.5ppt) and net exports (-0.1pt) weighing on the headline growth rate. Year-ended growth firmed to 2.1% from a revised 2% (1.8% prior) - already above the RBA's end-2025 forecast of 2%. This should reaffirm the RBA's on-hold stance at next week's meeting.
After lifting to 0.7% in the previous quarter (revised from 0.6%), economic growth softened to 0.4% in the latest quarter. Despite the weaker outcome this quarter, growth was more broadly driven than in the June quarter that relied entirely upon a sales-driven boost to household consumption (0.9%). With discretionary spending pulling back (-0.2%), household consumption slowed to 0.5%. However, business investment (3.4%) rose at its fastest pace since the pandemic rebound in 2021 as firms ramped up spending on data centres, while dwelling investment (1.8%) was underpinned by the strongest lift in home building activity in 2 years. Renewed strength in public demand (1.1%) was also a key growth driver. That left inventories (-0.5ppt) and net exports (-0.1ppt) - both swing factors - holding back growth.
The pick-up in domestic demand, and its broad-based composition, is a key theme from the September quarter National Accounts. Another is the resurgence in private demand, inverting from a year ago when public demand was the dominant driver. Over the past year, private demand rose from 0.6%Y/Y to 3.1%Y/Y, taking up the running as public demand slowed from 4.9%Y/Y to 1.3%Y/Y currently.
More to come.
