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Australia’s economy grew 0.6% in the June quarter, outpacing expectations and marking the fastest annual growth rate in nearly two years, Treasurer Jim Chalmers said Wednesday.
Gross domestic product rose 1.8% over the year, according to the Australian Bureau of Statistics national accounts data released earlier in the day. Chalmers said the figures show momentum returning to the economy despite global headwinds.
“This result was better than most economists expected,” Chalmers told reporters in Canberra. “It’s a very welcome and substantial pick-up in growth in our economy.”
The June quarter growth rate was the equal fastest in almost three years, Chalmers said, noting that Germany and Canada saw their economies contract over the same period. “Our economy is gathering pace,” he said.
Private sector leads growth
Chalmers highlighted a shift away from reliance on public spending, with private demand emerging as the key driver. Private final demand rose 0.6% in the quarter and 1.9% through the year, contributing 0.4 percentage points to growth.
“The big story in today’s data is the private sector recovery,” Chalmers said. “This is the recovery that we were planning for, preparing for and hoping for.”
Household consumption grew 0.9% in the quarter, also contributing 0.4 percentage points. Chalmers attributed the rise to wage growth, three recent interest rate cuts and tax reductions that began rolling out earlier this year.
“Consumption is growing because real incomes are growing,” he said. Real incomes per capita rose 2.4% over the year, the strongest increase in nearly four years.
Strong wage growth, easing inflation
Compensation of employees increased 1.1% in the quarter and 6.7% over the year, lifting the wages share of income to 54%, up from below 50% when the government took office, Chalmers said.
The national accounts measure of inflation fell to 2.9% annually, the lowest in three and a half years. Mortgage interest costs have already dropped by about $800 million since late 2024 following the Reserve Bank’s rate cuts, he said.
“Under this government we’ve seen inflation down, debt down, real wages growing, unemployment low, interest rates falling and now economic growth picking up,” Chalmers said.
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Investment and housing
Private investment made a mixed contribution to growth. Dwelling investment rose 0.3% in the quarter and 4.8% over the year, extending its longest run of quarterly growth in a decade.
Business investment fell 0.4% in the quarter but was up 0.2% through the year, partly due to the completion of large mining and renewable energy projects. Growth in software and artificial intelligence investment partly offset the decline.
“We can do better on business investment, but the average annualised figure under us has been stronger than what we inherited,” Chalmers said. He added that a strong pipeline of construction and renewable projects should support future growth.
Global comparisons
Chalmers said Australia’s record of uninterrupted growth sets it apart from other advanced economies.
“Australia is one of only six advanced economies that have grown every single quarter for the last three years,” he said. “Thirty-two out of 38 OECD economies have gone backwards at least one quarter, and Australia is not one of them.”
The treasurer also pointed to employment growth, which he said has been stronger than in any major advanced economy. More than 1.1 million jobs have been created since the government took office, most of them in the private sector.
Challenges remain
Chalmers acknowledged challenges in lifting productivity, which rose 0.3% in the quarter and 0.2% annually. “We welcome the lift … but we don’t get carried away,” he said. “We’ve still got a very substantial challenge.”
He also addressed questions about the steep fall in reported cigarette consumption, which dropped 22% over the year. Chalmers said part of the decline reflects reduced smoking rates, while part reflects illegal tobacco trade.
“We’ve provided $350 million over two budgets to fight criminals associated with the illegal tobacco trade,” he said. “We know it’s an ongoing challenge.”
Chalmers said the government will continue working to speed up approvals for renewable energy, housing and critical minerals projects to boost long-term growth.
“Business investment will be the key going forward,” he said. “If we can get more investment and make our economy more productive, we can lift real wages and living standards over time.”
Asked whether the budget could fund more aged care places to meet growing demand, Chalmers said, “The short answer is yes,” noting Health Minister Mark Butler and Assistant Minister Sam Rae would provide details.
State and territory treasurers will meet in Canberra on Friday to discuss road user charging, including principles for future fuel tax and congestion policies.
Despite the upbeat tone, Chalmers stressed the government would remain focused on structural reforms. “We know that our economy still has weaknesses in parts,” he said. “But overwhelmingly the story in these national accounts is a very positive one.”
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