Australian national accounts, March quarter 2026

Business investment powers ahead. Q1 GDP: 0.3%qtr, 2.5%yr. Q1 New Business Investment: 5.7%qtr, 10.4%yr

As we expected, the Australian economy expanded just 0.3% over Q1 2026 and 2.5% in year‑ended terms – the softest quarterly growth rate since Q2 2024.
The big story in the quarter was investment in data centres. We estimate that the net effect of this investment, including spillover effects, drove all the growth this quarter and around 0.8ppts of GDP growth in year‑ended terms.
The economy was clearly slowing even before the conflict in the Middle East and interest rate hikes started to impact. The headwinds from these developments will be more fully reflected in Q2 2026, with the possibility of a quarterly contraction, which would be the first quarterly decline since the GFC (excluding COVID).
On the supply side, Q1 saw a 0.6%qtr fall in productivity but the cost impact was offset by softer wages growth. This meant annual growth in the economy’s labour cost base ticked lower from 3.3%yr in Q4 to 3.2%yr in Q1, back near pre‑pandemic rates.
The RBA may view softer growth as a ‘necessary evil’ to bring demand and supply back into balance. However, it will remain focussed on upside risks to inflation and inflation expectations.

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