Key Takeaways
- December quarter GDP up 0.8%; annual growth at 2.6%, in line with expectations.
- Domestic demand rose 0.5% in Q4 and 2.9% YoY — strongest pace in years outside the pandemic period.
- Business investment +4.4% YoY; housing construction +5.5% YoY; productivity surprised at ~1% YoY.
- Consumer confidence fell 3.1pts to its lowest since December 2023.
- Job ads up — at highest level since October 2024 — pointing to resilient labour demand.
Market UpdateResilient demand and a productivity surprise
Australia’s economy expanded 0.8% in the December quarter, bringing annual growth to 2.6%. The result was broadly in line with expectations.
Domestic demand remained a key driver of growth. Spending across households, businesses and government rose 0.5% for the quarter and 2.9% over the year — the strongest pace in several years outside the pandemic period. Both public and private sectors contributed.
Consumer spending slowed but remains supported by rising incomes. Household consumption increased 0.3% in the quarter, softer than expected, though improving real incomes and population growth continue to support overall spending levels.
Investment activity remains relatively strong. Business investment rose 4.4% over the year, with gains in building and engineering construction. Housing construction also rose 5.5% annually, supported by a large pipeline of projects and continued demand for new dwellings.
Productivity growth provided a notable positive surprise. Labour productivity increased about 1% over the year, helping ease pressure on labour costs. While some components remain uneven, continued investment, resilient demand and improving productivity suggest underlying economic momentum remains intact.
Consumer ConfidenceConfidence falls 3.1pts
Labour MarketHiring demand picks up again
- Job advertisements rose in February, reaching their highest level since October 2024.
- Growth was broad-based across most states and industries — hiring is not limited to one sector.
- Job ads remain well above pre-pandemic levels even as they have cooled from the 2022/early-2023 peak.
- The labour market is stabilising rather than weakening sharply. Businesses continue to recruit, at a more measured pace.
Foreign ExchangeAUD faces volatility as global risks rise
- The AUD trading around US$0.703, slipping recently and heading for its first weekly decline since mid-January.
- Middle East tensions a key driver — conflict involving Iran has pushed oil higher amid supply concerns.
- Higher geopolitical risk has strengthened the USD as investors move toward safer assets.
- Markets currently pricing roughly 30% probability of a March RBA hike; expectations for a move to 4.10% later in the year are more firmly priced.
- Near-term volatility likely as markets balance global uncertainty against Australia’s relatively stable domestic conditions.
Sources: Westpac Weekly (2 March), ABS, Trading Economics, ANZ-Roy Morgan, Macrobond. This summary is for informational purposes only and should not be considered financial advice.