Australia’s economy grew less than expected in the first quarter of this year, with a 1.3% expansion from the previous year, according to data released by the Australian Bureau of Statistics (ABS). The growth was lower than the estimated 1.5% forecasted by a Reuters poll.
The sluggish growth is attributed to shrinking public spending and weakened consumer demand, as well as reduced exports due to extreme weather events. This led to a quarter-on-quarter expansion of only 0.2%, undershooting expectations for a 0.4% growth.
Reserve Bank of Australia (RBA) Governor has already cut interest rates to its lowest level in two years at its last meeting in May, citing easing inflation concerns. However, economic uncertainty may prompt households to prioritize saving over spending.
The RBA has forecast domestic GDP growth to pick up in 2025, driven by a recovery in consumption and continued strength in public demand. Despite this, some economists expect the central bank to cut interest rates again if further signs of economic weakness emerge in the second quarter.
Inflation eased to a four-year low of 2.4% in the first quarter of 2025, within the RBA’s target range of 2-3%. The central bank has also warned that “somewhat weaker” demand for exports could weigh on growth.
The latest economic data may bolster the case for further interest rate cuts by the RBA. However, some economists caution that upside risks to inflation persist, and the central bank is unlikely to cut rates below 3.35% in the current easing cycle.
Source: https://www.cnbc.com/2025/06/04/australia-economy-rba-gdp-q1-2025.html