Australia's Gross Domestic Product grew by a modest 0.2% in the March 2025 quarter, a down from the 0.6% growth recorded in the December 2024 qtr.
The ABS reported that Australia's Gross Domestic Product (GDP) grew by a modest 0.2% in the March 2025 quarter, a slowdown from the 0.6% growth recorded in the December 2024 quarter. On an annual basis, GDP increased by 1.3%, falling short of the RBA’s forecast of 1.6%. This subdued growth has intensified discussions about potential interest rate cuts in the coming months.
A significant concern is the continued decline in GDP per capita, which fell by 0.2% during the quarter. This marks the ninth decrease in the past eleven quarters, indicating a per capita recession despite overall economic expansion. The decline is attributed to factors such as weak business investment, stagnant productivity, and a reliance on government-funded sectors like healthcare and education.
Productivity remains a central concern in the Australian economy, having stalled at pre-pandemic levels. Business investment in machinery and equipment declined by 3.7% over the past year, limiting the potential for near-term productivity gains. This presents a structural hurdle to Treasurer Jim Chalmers’ ambitions for a transition toward a private sector-led recovery, as growth remains disproportionately reliant on government-funded activity in sectors such as health and education. The subdued investment environment reflects a broader hesitation among businesses, with many commentators citing Australia’s tax and regulatory settings as impediments to innovation and capital formation.
The weak economic indicators have led economists to anticipate further monetary easing. The RBA had already reduced the cash rate to 3.85% in May, and markets are now expecting additional cuts, potentially bringing the rate down to 2.85% by early 2026. These measures aim to stimulate private sector demand and address the sluggish economic momentum.
The March 2025 quarter data reveal an Australian economy grappling with slow growth, declining per capita income, and cautious consumer spending. These challenges promote the need for policy interventions to reinvigorate economic activity and address structural issues hindering growth.
Source: Australian Bureau of Statistics, Australian National Accounts: National Income, Expenditure and Product, 4 June 2025.
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