Australia’s Economic Growth in Q3

Australia’s economy grew less than expected in the third quarter despite increased government subsidies, as household spending remained flat and export prices fell due to slowing global demand for commodities.

GDP Growth

Gross domestic product rose 0.3% quarter-on-quarter in the three months ended September 30, according to data from the Australian Bureau of Statistics released on Wednesday. This figure was below market expectations of 0.5%, but slightly above the previous quarter's rise of 0.2%.

Year-on-year GDP grew 0.8%, lower than expectations of 1.1%, and slower than the 1.0% growth seen in the prior quarter.

Household Spending

Household spending was flat in the September quarter following a 0.3% fall in June. Katherine Keenan, ABS head of national accounts, stated, "The largest detractor from growth was for electricity and gas spending due to the implementation of the energy bill relief rebates."

Inflation Trends

Inflation has eased significantly from pandemic-era highs, with the latest quarterly consumer price index (CPI) data showing a 2.8% annual rise, comfortably within the Reserve Bank of Australia's (RBA) target range. However, core inflation remains elevated due to persistent wage pressures.

Export Prices

Export prices fell 2.6% in September, reflecting a slowdown in global demand for bulk commodities. Industrial metals remain a key driver for Australia's economy.

Keenan remarked, "The quarterly growth in domestic prices was the lowest observed since March 2021. The growth this quarter reflected softening goods prices in the economy alongside more resilient services prices reflecting high demand for labour and costs of essential services such as rent, education and health."

Government Spending

Despite the economic drag, government spending increased, with social benefits paid to households rising as households received energy cost relief rebates. Public investment also rose 6.3% in the September quarter after three consecutive quarterly declines, driven by higher government investment in defense equipment and infrastructure.

Implications for Interest Rates

Steady expansion in the Australian economy provides the Reserve Bank of Australia with more capacity to keep interest rates elevated, particularly due to persistent inflation.

Recent analyses suggest potential rate cuts could begin in mid-2025, depending on inflation and growth dynamics.