Australia Posts Fastest GDP Growth in Nearly Two Years on Strong Investment and Consumer Spending

Australia’s economy expanded at its quickest pace in almost two years during the third quarter, supported by resilient household consumption and a sharp rise in business investment, even as overall growth came in slightly below expectations.

Data from the Australian Bureau of Statistics released Wednesday showed GDP rising 2.1% year-on-year, matching the pace seen in late 2023 but missing the 2.2% forecast in a Reuters poll. On a quarterly basis, the economy grew 0.4%, slower than the 0.7% expected.

Economists said the softer headline number masks a stronger underlying performance. Oxford Economics’ Harry Murphy Cruise noted that domestic activity surged 1.2% when excluding inventories and trade, the fastest expansion in more than two years. Moody’s Analytics’ Sunny Nguyen echoed that sentiment, saying deeper-than-expected inventory write-downs pulled the headline figure lower, but do not reflect weakening demand.

Private investment was a major driver, recording its strongest jump since early 2021, supported by machinery, equipment and large data-center projects in New South Wales and Victoria. Household consumption also remained solid, particularly in spending on essentials such as rent, utilities, insurance, healthcare and food.

However, net trade weighed on overall growth as imports outpaced exports, dragging the economy by 0.1 percentage point during the quarter.

The GDP release comes as the Reserve Bank of Australia faces persistent inflation pressure. Annual inflation accelerated to 3.8% in October, its fastest pace in seven months and above the RBA’s 2–3% target range. Governor Michele Bullock recently warned the economy may have reached its potential growth limit, and said the bank will respond if fresh price pressures emerge.

Following the data, economists said rate cuts remain unlikely in the near term, and a rate hike at next week’s meeting cannot be ruled out. Australian 10-year government bond yields rose to 4.65% after the release, extending gains seen since mid-October.

Despite global uncertainty and tighter financial conditions, Australia’s economy has shown steady momentum. Growth in the second quarter was revised to 1.8% year-on-year, driven by domestic spending across households and the public sector. The outlook now hinges on how quickly inflation moderates and whether trade pressures ease in the coming months.