Australian economy grows beyond expectations

The Australian economy grew by a larger than expected 0.6 per cent in the three months to June this year, taking annual growth to 1.8 per cent as households loosened their purse strings and government spending rebounded.

Fresh data from the Australian Bureau of Statistics on Wednesday showed economic growth tracking higher than the 1.6 per cent annual growth economists and the Reserve Bank had been expecting.

The June quarter takes in the impact of the Reserve Bank’s February and May interest rate cuts. Net national disposable income per person lifted by 0.1 per cent and has been positive through the first six months of 2025.

GDP per person lifted by 0.2 per cent and is now at its highest level since March 2024.

Household spending was the main contributor to the nation’s growth, with non-essential spending climbing 1.4 per cent as households took advantage of end of financial year sales and the close proximity of Easter and ANZAC day to extend their holiday break.

Spending on recreation and culture (2 per cent), furnishings and household equipment (1.7 per cent), new cars (2.4 per cent), and hotels and cafés (0.7 per cent) all ramped up.

Household spending on essentials in categories such as health (1.9 per cent) and electricity and gas (2.9 per cent) also increased as they accessed more medical services amid a strong flu season, while promotional activity from major supermarket chains boosted spending on food.

The household savings ratio eased to 4.2 per cent in the June quarter but was revised up for the March quarter to 5.2 per cent.

Government spending was also stronger, climbing 1 per cent in the three months to June on the back of a rise in social benefits to households, more spending on Medicare and the Pharmaceutical Benefits Scheme, and the costs of running the federal election. Defence spending also rose because of military exercises.

The Australian economy grew faster than expected in the June quarter.Credit: Dion Georgopoulos

While federal government spending was higher, state and local government spending slipped as electricity rebate schemes wound down.

In another sign the private sector is starting to accelerate, the gross value added per hour worked in the market sector grew by 0.5 per cent.

Net trade also contributed to economic growth as iron ore and LNG exports rebounded.

However, business investment continues to be muted. Total private investment rose by 0.1 per cent on the back of a lift in spending on intellectual property, dwellings and machinery. There was a 1.2 per cent drop in non-dwelling construction.

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Public sector investment dropped 3.9 per cent.

In a statement, Treasurer Jim Chalmers said the figures were positive.

“Today’s very welcome numbers confirm the private sector recovery we’ve been planning and preparing for is gathering pace,” Chalmers said.

But Sean Langcake from Oxford Economics Australia cautioned the 0.6 per cent quarterly result might be the high point this year.

“The June quarter benefitted from a rebound from a soft March quarter, business and consumer confidence are still a little shaky and the labour market appears to be cooling.”

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