First impressions: Australian National Accounts, June quarter 2025

The June quarter National Accounts were stronger than expected, with GDP growing 0.6%qtr and 1.7% in six-month annualised terms. Household spending was much firmer than we expected, partly reflecting higher discretionary services spending due to the unusually close proximity of the Easter and ANZAC day public holidays.

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The June quarter National Accounts were stronger than expected, however the economy slowed a touch over the first half of 2025, with GDP growing 0.6%qtr and 1.7% in six-month annualised terms – down from the 1.9% pace recorded in the second half of 2024. The outcome was stronger than Westpac’s expectation of 0.4%qtr and the median market expectation of 0.5%qtr.
Today’s Accounts (including revisions) paint a firmer picture of the Australian consumer with incomes and spending both showing steady recoveries, albeit with what are likely to be some one-off supports in the latest quarter. That said, it will still take time for businesses to respond and invest more. Meanwhile we have now clearly passed the peak in terms of the public spending contribution to growth. The supply side of the economy looks to have normalised, with productivity in the market (ex-mining) sector growing around its pre-pandemic average.
Key uncertainty is whether the pick-up in consumption will continue going forward. The ABS noted that an increased number of people took time off between the Easter and ANZAC day public holidays, giving a boost to discretionary services spend in the quarter. This boost will likely unwind in the September quarter. Notably, our Westpac–DataX Card Tracker Index has seen slower growth since mid-year.

The detail 

Domestic demand (spending by consumers, businesses, and governments) grew 0.5%qtr in Q2. While the consumer looks stronger, the overall growth impulse is being weighed down by a lack of business investment and the faster than expected pull-back in public infrastructure investment – on today’s numbers, new public investment has fallen almost 7% over the past three quarters. This has negative implications for downstream industries, such as professional service providers.  

Consumer spending was robust in the June quarter, a continued improvement in real incomes combining with a holiday-related boost to discretionary services spend. Household consumption grew 0.9%qtr and 2.0%yr. With population growth running at 1.7%yr, this implies consumption per capita has started to post small increases. A key uncertainty is the extent to which this will continue. Some of the strong quarterly gains looks to be consumers responding to discounting and taking longer than usual holidays around the Easter and ANZAC day public holiday period. The Westpac–DataX Card Tracker Index shows a slowdown since mid-year, suggesting some of the lift in momentum may have faded.

It will take time for the business sector to respond to improving demand. Indeed, new business investment fell 0.4%qtr in the June quarter to be just 0.3%yr higher in annual terms – weak by historical standards and soft in an economy where the population in growing by around 1.7%yr. Investment in intangibles (such as software) was the only component that grew over the quarter.

Public spending remains elevated, but as we predicted in our preview, growth has declined as we pass the peak in construction activity related to large infrastructure projects. Public final demand grew 0.2%qtr to be 3.0% higher in annual terms (this is almost one percentage point lower than the RBA’s latest forecast), with public investment falling for a third consecutive quarter. There was also a pull-back in state and local government consumption as temporary cost of living support has been wound back. 

Dwelling investment grew 0.4%qtr after a significant lift in the March quarter, to be 4.8% higher in annual terms. There remains a healthy pipeline of projects to work through, supporting housing activity going forward, particularly as weakness in other parts of the construction sector (such as non-residential buildings) frees up resources to be used for the construction of new dwellings and housing renovations.

Net exports and inventories were broadly as expected. Net exports contributed +0.1 ppts to growth in GDP in Q2 on the back of stronger mining exports. This was offset by a detraction of -0.1 ppts from the rundown in inventories, particularly in the consumer-facing sectors. The updated demand-side picture suggests some of the latter may have been due to firmer than expected consumer demand.

We estimate that productivity in the market (ex-mining) sector grew at around 0.7%yr in Q2 (estimates will be finalised after Friday’s Labour Accounts). As well as moderating growth in the sector’s unit labour costs to around 3.7%yr, this supports the view that whole-economy productivity growth will recover as the sector-specific factors in mining and the care economy wash out.

First impressions: Australian National Accounts, June quarter 2025

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