Fin-X Rapid Response December 3rd

Australian GDP growth was slightly below estimates in Q3 supported by a pick-up in domestic demand, while inventory drawdowns and net exports detracted.

• Australian GDP rose by +0.4% in the September quarter in seasonally adjusted chain volume measures, according to the ABS today. The consensus forecast had been for a +0.7% increase.

• June quarter GDP was revised up from +0.6% to +0.7%, with annual GDP growth measured at +2.1%, the highest growth rate since 2023.

• In nominal terms, GDP rose by +1.7% over the quarter.

• Domestic final demand contributed +1.1% percentage points to GDP growth.

• Private demand led the contributions to growth through private investment (+0.5%) and household consumption (+0.3%).

• Public demand continued to support growth through government expenditure (+0.2%) and investment (+0.2%).

• Essential spending led the rise in household consumption, growing by +1.0% with increased spending across insurance and other financial services (due to the increase in the superannuation guarantee to 12%), electricity, gas, and other fuels, rent and other dwelling services, health and food.

• Net trade detracted -0.1% from GDP growth, as the rise in imports of goods and services (+1.5%) outpaced exports (+1.0%).

• Changes in inventories detracted -0.5% from GDP growth. Mining inventories were drawn down to service increased export demand for coal, while mining production was subdued following strength in the previous quarter. Retail trade drew down on existing stock as discount periods extended into the September quarter. Public authorities also drew-down on inventories following a build-up in June, in line with ongoing demand for non-monetary gold.

• Grace Kim, ABS head of National Accounts, said: "Economic growth was steady in the September quarter 2025. The rise this quarter matches the average quarterly growth since the end of the COVID‑19 Pandemic. GDP per capita was flat for the quarter as economic growth was in line with population growth but remained +0.4% higher than a year ago".

• The terms of trade rose +0.3%. 

• Household saving to income ratio rose to 6.4% from 6.0%. Gross disposable income rose +1.7%, faster than the rise in nominal household spending of +1.4%.

• Compensation of employees (COE) increased by +1.7%. Labour market conditions remained tight with the unemployment rate (4.5%) increasing slightly by the end of September. Hours worked grew +0.2%, in line with growth in full-time employment (+0.3%).

• S&P/ASX200 8,608 +0.3%, AUDUSD 0.6573 +0.15%, Aus 10yr 4.59%% -2bps

Fin-X View

• Despite missing estimates, the economy experienced reasonable growth in Q3, supported by robust private demand for the second quarter in a row.

• However, the national accounts data reiterated that household budgets remain constrained, with a significant portion of the increase in spending diverted to essentials.

• Population growth was also a significant factor, contributing to a reasonable backdrop for businesses to operate.

• Inventory investment is likely to be less of a drag in this quarter, and might mean that the economy will recover some of this quarter's undershoot. However, the constraints on budgets suggests that a significant acceleration seems unlikely. The RBA can therefore afford to be patient before making any changes to policy.