Australia's GDP growth to hold at 0.4% in Dec quarter

The September quarter outcome surprised on the downside, with growth of 0.4 per cent, around 0.2 percentage points below the Institute’s final nowcast. Despite this, the national accounts revealed some encouraging details, notably a broad-based lift in private demand, which contributed 0.8 percentage points to overall output growth, Melbourne Institute of Applied Economic and Social Research said in its latest release.

Net exports were a slight drag, subtracting 0.1 percentage points, while the terms of trade edged up 0.3 per cent.

A major restraint on growth came from inventories, which subtracted 0.5 percentage points as demand was met through stock drawdowns rather than new production. The Institute noted that if private demand remains firm in the December quarter without a further inventory rundown, the current growth nowcast may prove conservative. However, volatility in public demand and inventories makes forecasting challenging.

The unemployment rate held steady at 4.3 per cent in November, up 0.4 percentage points from a year earlier, while underemployment rose and participation eased. Non-farm labour productivity remained flat, and unit labour costs rose 5.4 per cent year on year, well above levels consistent with the Reserve Bank of Australia’s inflation target, highlighting persistent inflationary pressures.

Consumer sentiment weakened sharply in December, with the Westpac–Melbourne Institute Consumer Sentiment Index falling 9 per cent, though it remained slightly higher than a year ago. Household spending data, however, showed resilience, with October spending up 1.3 per cent month on month and discretionary spending rebounding strongly.

Looking ahead, the Westpac–Melbourne Institute Leading Index suggests the Australian economy could grow at an above-trend pace within the next three to nine months, offering cautious optimism beyond the near-term slowdown.

ALCHEMPro News Desk (SG)