Australia's Economy Sees Fastest Growth in Nearly Three Years, Exceeding Forecasts
Australia's economy grew at a robust annual rate of 2.6 percent in the December quarter, an increase from 2.1 percent in the prior quarter. This marks the fastest growth rate in nearly three years and exceeded initial forecasts.
Quarterly economic growth reached 0.8 percent in the December quarter, surpassing the 0.5 percent observed in the September quarter.
The Reserve Bank of Australia (RBA) had projected an annual growth rate of 2.3 percent by the end of last year, as per its February forecasts, which was lower than the actual 2.6 percent.
This robust economic growth coincided with an unanticipated rise in inflation towards the end of 2025. This situation contributed to the RBA's decision to raise interest rates in February, aiming to moderate economic activity and reduce inflation.
Economic Growth Drivers
Data from the Australian Bureau of Statistics (ABS) indicated broad-based growth in the December quarter, with 17 out of 19 industries showing increased economic activity.
Corporate Profits SurgeCorporate profits increased by 2.2 percent in the December quarter, marking the highest quarterly rise since March quarter 2023. Mining profits rose by 5.7 percent, driven by increased mining activity and higher export prices for iron ore and thermal coal. However, liquefied natural gas (LNG) profits decreased due to falling prices, attributed to global oversupply and weak demand.
Strong Investment Across SectorsPrivate investment saw its fifth consecutive quarterly increase, with significant investments in data centers and aircraft, according to Grace Kim, ABS head of National Accounts.
Government investment also increased:
- Commonwealth investment rose 3.3 percent due to defense assets.
- State and local government investment grew 1.4 percent due to transport infrastructure.
The household saving-to-income ratio increased to 6.9 percent from 6.1 percent in the September quarter, reaching its highest level since September 2022.