Key facts
- Australia's real GDP grew 0.3% in Q1, down from 0.9% in Q4.
- Annual GDP growth slowed to 2.5%.
- Net trade subtracted 0.8 percentage points from GDP growth due to increased imports.
- Domestic demand contributed 1 percentage point, led by a 16.3% surge in business investment.
- Household consumption added 0.3 percentage points, with subdued discretionary spending.
- The unemployment rate rose to 4.5% in April.
Australia's economy grew by 0.3% in the March quarter, a slowdown from the 0.9% increase recorded in the previous quarter, according to data from the Australian Bureau of Statistics. The annual growth rate held steady at 2.5%. The deceleration was partly influenced by a significant surge in imports, including data processing equipment for data centers and fuel, which reduced GDP growth by 0.8 percentage points. Net trade experienced its largest quarterly drop in two years, falling by 1.1% due to weather-related disruptions affecting coal and iron ore exports. In contrast, domestic demand provided a boost of 1 percentage point to GDP growth, primarily driven by a substantial 16.3% increase in business investment in machinery and equipment, the largest rise in three decades. Household consumption contributed 0.3 percentage points, though discretionary spending saw only a modest 0.1% increase amid rising energy costs and borrowing rates. The Reserve Bank of Australia, having implemented three rate hikes this year to reach 4.35%, maintains that the economy cannot sustain growth above 2.0% without exacerbating inflation. The RBA anticipates a further economic slowdown, projecting annual growth to fall to 1.9% by the second quarter and 1.3% by year-end. The outlook suggests more challenging times ahead, with household consumption declining in April, house prices stagnating, and the unemployment rate climbing to a 4-1/2-year high of 4.5% in April.