Chart of the Month - June 2025

It has been a wild start to the year. Tariffs, floods, and Ange Postocoglou getting sacked at Tottenham 17-days after winning the Europa League! Despite all this, Australia’s real GDP grew 0.2% in the March quarter, on a quarterly basis (see chart below). While this was below the expectations of 0.4%, Australia managed to grow while other countries, like the US (-0.3%), saw a decrease. Investors can also take comfort in strong private demand, which is expected to increase over the course of the year.

Private demand remains strong

After recovering in the December 2024 quarter, private demand increased by 0.4% in the March quarter and was the largest contributor to growth in the quarter at 0.3 percentage points (see chart below).

Breaking private demand down, household consumption increased 0.4% and private investment increased 0.7% in the quarter.

The RBA is expecting household consumption to increase over the course of the year as falling inflation increases real incomes and interest rate cuts reduce home loan interest payments. 

In contrast, after three strong previous quarters, public demand contracted 0.4% in the March quarter and contributed -0.1 percentage points to March GDP. This was its largest negative contribution since Q3 2017. Public investment remains at high levels but fell 2% in the quarter as the pipeline of large state and local projects starts to tail off.

GDP per capita falls

Much was made of Australia’s GDP per capita recession in 2023 and 2024. During that period, population growth (including immigration) outstripped productivity to keep the Australian economy humming.

Real GDP per capita increased 0.1% in December but fell 0.2% in the March quarter. While overall GDP was up, this is another reminder that, like most countries except the US, Australia needs to increase its productivity. The government recently asked the Productivity Commission to come back with recommendations across 5 key areas by the end of the year. Maybe AI can help!

Agriculture’s strong growth  

Agriculture, forestry, and fishing increased 4.3% in the quarter on the back of increases in livestock production (see chart below). It would have been even larger if rain had not prevented crop planting in Queensland.

Rain and cyclones in Queensland and Western Australia  led to decreases in coal, iron ore, natural gas, and oil production. Mining should thus bounce back next quarter.

Final thoughts

Australia entered the year with positive growth. The private sector led the way and is expected to bump up growth further over the course of the year as inflation and interest rates fall. Tariff uncertainty will have its way in the remaining quarters, but Australia will be pleased to see that the US and China recently made up (again).