Economic growth slows in the third quarter of 2025

GDP reading: Australia's GDP increased 0.4% on a seasonally adjusted quarter-on-quarter basis in Q3, following 0.7% growth in the previous quarter. Q3’s reading was below market expectations, but largely as the readings for Q1 and Q2 were revised up, creating a tougher base of comparison. Net trade and inventories detracted from growth, while domestic demand contributed positively.

Drivers: Relative to the previous period's data, figures in Q3 softened for private consumption (+0.5% in seasonally adjusted quarter-on-quarter terms vs +0.9% in Q2), government consumption (+0.8% vs +0.9% in Q2), exports of goods and services (+1.0% vs +2.3% in Q2) and imports of goods and services (+1.5% vs +2.3% in Q2). In contrast, the reading for fixed investment improved in Q3 (+3.0% vs -0.7% in Q2). Private investment was a particular strong point, buoyed by higher spending on data centers, housing, renewable energy and water infrastructure.

Panelist insight: On the reading, Nomura analysts said: “[The Q3 data] suggests that the combination of lower interest rates and some reduction in global uncertainty is boosting animal spirits, and that the hoped-for transition from public to private sector-driven growth is underway. Government spending did rise firmly in Q3 (adding 0.4pp to Q3 GDP), but we think growth will become less reliant on the public sector going forward. In addition, the main detraction from growth came from a depletion of inventories (subtracting a large 0.5pp in Q3). We think at least some of this was unanticipated, such that inventories will likely contribute to growth in Q4.”

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