Australia’s third-quarter GDP expands at fastest pace in about 2 years on investment, consumption boost
Sydney Opera House, designed by Danish architect Mr Jorn Oberg Utzon, at first light as the sun rises over Sydney harbor and city center skyscrapers.
Ucg | Universal Images Group | Getty Images
Australia’s third-quarter economic growth missed analysts’ expectations, but clocked its fastest expansion in about two years, driven by strong investment and consumer demand.
The country’s GDP rose 2.1% year on year, marking its strongest expansion since the third quarter of 2023 when the economy grew at the same rate, data from the Australian Bureau of Statistics showed on Wednesday. Economists were expected GDP growth of 2.2%.
On a quarter-on-quarter basis, Australia’s GDP grew 0.4% compared with 0.7% forecast in a Reuters poll.
“The miss isn’t a sign of a materially weaker economy,” said Harry Murphy Cruise, head of economic research and global trade at Oxford Economics, noting that excluding inventories and trade, the domestic economy surged 1.2% compared with the previous quarter — the fastest expansion in more than two years.
Echoing that view, Sunny Nguyen, head of Australia economics at Moody’s Analytics, attributed the softer-than-expected headline figure partly to businesses writing down inventories “more aggressively than expected.”
“But they say more about timing and accounting than underlying final demand,” Nguyen added.
Domestic final demand contributed 1.1 percentage points to growth. Private investment grew at the fastest pace since March 2021, driven by business investment in machinery, equipment and major data centers across New South Wales and Victoria.
Household consumption continued to expand, led by insurance, electricity, gas, rent, healthcare and food.
Meanwhile, net trade was a major drag, denting the economy by 0.1 percentage point, as imports growth outpaced rise in exports in the three months through September.
Before the GDP data was released, Reserve Bank of Australia Governor Michele Bullock cautioned that the economy had likely hit its potential growth limit at a time when inflation has been staying above the bank’s target. The board will act on renewed price pressures, Bullock added.
The country’s inflation accelerated in October, rising 3.8% year on year, marking its fastest pace in seven months, exceeding the RBA’s targeted range of 2% and 3%.
At the monetary policy meeting last month, the central bank kept its interest rate unchanged at 3.6%, saying it was cautious about easing further, given a strengthening economy, tight labor market and persistent inflationary pressure.
Rate bets
“The Q3 data confirms that the economy is still too hot for the RBA’s liking,” said Cruise, adding that rate cuts were “off the table for some time” and a hike next week to nip inflation “can’t be ruled out.”
Australian government 10-year bond yield rose 4 basis points to 4.650 after the release. It has gained 55 basis points since mid-October.
Bullock said last month that the current interest rate cutting cycle could be close to an end, with the central bank forecasting inflation to stay above its target range of 2% to 3% until the second half of next year.
The RBA’s board meets next week and is widely expected to leave interest rates at 3.6%.
In the second quarter this year, Australia’s economy expanded 1.8% year on year, compared with 1.3% in the prior quarter, underpinned by domestic spending including household and government consumption.
