Sydney Harbor and the Horizon of the Central Affairs district (CBD) in Sydney, Australia, Tuesday April 29, 2025.
Bloomberg | Bloomberg | Getty images
The Australian economy became less than expected in the first quarter of this year, the Australian statistics office said on Wednesday in a statement, while growth was blocked in the midst of global trade tensions that run.
The economy increased by 1.3% in annual sliding in the first quarter, less than the estimated growth of 1.5% in a reuters survey. This was unchanged from the growth of 1.3% in annual shift during the previous quarter.
Based on a quarter in quarter, the economy increased by 0.2%, subcontracting expectations for growth of 0.4%.
Katherine Keenan, head of ABS national accounts, has attributed gentle growth to the reduction of public spending and to weaken consumers’ demand and exports.
“Public spending has recorded the greatest detraction in growth since the quarter of September 2017. Extreme weather events have reduced interior final demand and exports. The weather impacts were particularly obvious in mining, tourism and shipping,” said Keenan.
Official distribution data has shown that the most important activity traits came from the request of the public and net trade, each subcontracting 0.1 percentage point of the quarterly GDP figure, while private demand increased production by 0.3 percentage points.
The Reserve Bank of Australia reduced rates to 3.85%, its lowest level in two years, at its last meeting in May, while inflation problems were released, offering a certain scope to strengthen growth growing global commercial risks.
The release of the GDP of the first quarter could strengthen the case so that the RBA softens the monetary policy more, said Abhijit Surya, the main economist of APAC at Capital Economics, in a note, because high economic uncertainty can encourage households to prioritize savings on expenses.
Nevertheless, Surya warned that the rising risks of the persist of inflation, while labor costs continued to grow at a faster rate than the RBA inflation objective, maintaining the idea that the central bank will not reduce the rate to 3.35% in the current relaxation cycle.
Australian consumers’ inflation was held at a lower over four years of 2.4% in the first quarter of 2025, in the RBA target range from 2% to 3%. In April alone, monthly inflation was also stable at 2.4% compared to a year earlier.
The central bank said last month that it expects the growth of interior GDP to reproduce in 2025, driven by a resumption of consumption and a continuous force of public demand, while demand “slightly lower” for its exports could weigh on growth.
The minutes of its May 20 meeting showed that the Central Bank’s board of directors considered the reduction rates of 50 disproportionate base points, citing the prices “much higher than expected” by the Trump administration and “very unpredictable” tariff decisions in the future.
Some members of the Board of Directors have debated that a large reduction could provide “greater insurance” against the increase in global trade risks. The central bank finally proceeded to the more foreseeable route of a drop of 25 base points last month, leaving the door open to more rate drops.
Ben Udy, principal economist at Oxford Economics, is of the opinion that other signs of economic weakness extending in the second quarter could encourage the central bank to reduce rates again in July, earlier than its current forecasts.
“Gabilating the uncertainty on GDP is only worsening,” said UDY in a note on Wednesday.
The S&P / ASX 200 reference index increased by 0.83% after the GDP version, while the Australian dollar remained stable, the last exchange at 0.6460 compared to the dollar.
