Australia’s economy posts fastest growth in two years amid strong domestic demand, but inflation and rate pressures loom

Australia’s economy delivered its fastest expansion in nearly two years in the third quarter, though growth still fell short of economists’ forecasts, according to fresh data released Wednesday. Australia’s inflation picked up in October, climbing 3.8 percent year-on-year, its fastest pace in seven months.

The Australian Bureau of Statistics reported that GDP grew 2.1 per cent year-on-year, matching the pace last seen in the third quarter of 2023. However, the figure narrowly missed analysts’ expectations for 2.2 percent growth. Every quarter, the economy expanded 0.4 percent, undershooting the 0.7 percent projection from a Reuters poll.

Domestic final demand boosted growth by 1.1 percentage points, while net trade shaved off 0.1 point as imports exceeded exports. The figures follow RBA Governor Michele Bullock’s warning that the economy may have already reached its potential growth limit.
At last month’s policy meeting, the central bank held rates steady at 3.6 percent, signaling caution on further easing amid a firming economy, a tight labor market and lingering inflation pressures.

Bullock also warned last month that the rate-cutting cycle may be nearing its end, with the bank expecting inflation to remain above its 2 percent-3 percent target range until the second half of next year.

The RBA board meets next week and is widely expected to keep interest rates unchanged at 3.6 percent.

In the second quarter, Australia’s economy grew 1.8 percent year-on-year, up from 1.3 percent in the previous quarter, driven by household and government spending.