Strong domestic demand lifts expansion despite slight forecast miss
Australia’s economy grew 2.1 percent year over year in the third quarter, data from the Australian Bureau of Statistics showed Wednesday. Although slightly below the 2.2 percent forecast, the result marks the country’s strongest pace of growth since late 2023. On a quarterly basis, GDP rose 0.4 percent, compared with expectations for 0.7 percent, according to a Reuters poll.
Analysts downplayed the softer headline figure. Harry Murphy Cruise of Oxford Economics noted that when excluding inventories and trade, the domestic economy surged 1.2 percent quarter over quarter, the fastest gain in more than two years. Sunny Nguyen of Moody’s Analytics attributed the lower headline number in part to businesses writing down inventories “more aggressively than expected.”
Private investment and consumption lead the gains
Domestic final demand contributed 1.1 percentage points to growth. Private investment logged its strongest increase since early 2021, supported by business spending on machinery, equipment, and major data centers in New South Wales and Victoria. Household consumption also expanded, driven by spending on essentials such as insurance, utilities, rent, healthcare, and food.
Net trade weighed slightly on GDP, subtracting 0.1 percentage point as import growth outpaced exports from July to September.
Inflation pressures delay any shift toward rate cuts
Ahead of the report, Reserve Bank of Australia Governor Michele Bullock warned that the economy had reached its potential growth limit while inflation continues to run above the bank’s 2 to 3 percent target range. October inflation climbed to 3.8 percent year over year, its fastest pace in seven months.
The RBA kept rates steady at 3.6 percent last month, but analysts say the latest data signals that rate cuts are not on the near horizon. “The Q3 data confirms that the economy is still too hot for the RBA’s liking,” Cruise said, adding that another hike “can’t be ruled out.”
Australian government 10-year bond yields climbed following the release. Investors will be watching the RBA meeting next week, where policymakers are widely expected to maintain interest rates despite a still-tight labor market and persistent price pressures.
