SYDNEY, Dec 2 (Reuters) – Australia’s economy received a significant boost in the third quarter, driven by increased public expenditure and a surge in residential property values. Government outlays contributed 0.4 percentage points to gross domestic product during the three months ending in September, a notable rise compared to minimal impact in the prior quarter, according to data from the Australian Bureau of Statistics.
Alongside stronger fiscal activity, business investment showed resilience, tilting the balance of risks toward higher-than-expected growth. Net exports, however, slightly weighed on GDP, reducing it by 0.1 percentage point, as anticipated. Economists project a quarterly expansion of 0.7%, marking the strongest quarterly performance since late 2022 and lifting the annual growth rate to 2.2% — surpassing the Reserve Bank of Australia’s 2% estimate for trend output.
The upcoming official GDP figures are scheduled for release on Wednesday. The improved economic momentum has coincided with renewed inflationary pressures, undermining expectations for additional monetary easing. After three rate reductions this year, the central bank is now expected to maintain its current stance for the foreseeable future.
Adam Boyton, ANZ’s Australian economics lead, revised his forecast, withdrawing a previous suggestion of a further rate cut in 2025. He cited persistent price pressures, solid growth near the economy’s capacity, and a tight labor market as key factors behind the central bank’s likely caution.
Market pricing indicates that interest rates will remain unchanged until at least mid-2025, with futures suggesting a 70% chance of a rate increase by the end of 2026.
Additional data revealed that the total worth of residential real estate in Australia reached A$12 trillion ($7.85 trillion) in the last quarter, a new peak that has enhanced household balance sheets and supported consumer demand. Property prices have climbed nearly 8% in 2023 alone, raising concerns among regulators about whether current financial settings are sufficient to contain inflation.
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Australia’s government spending likely boosted Q3 economic growth
SYDNEY, Dec 2 (Reuters) – Australia ‘s government spending jumped in the third quarter to add to a long-awaited rebound in business investment, setting the stage for a solid economic performance. n nData on Tuesday from the Australian Bureau of Statistics showed government spending added 0.4 percentage points to gross domestic product (GDP) in the September quarter, after barely contributing in the previous quarter. n nSign up here. n nThat, coupled with solid business investment, suggested risks to economic growth are to the upside last quarter. The ABS also said on Tuesday net exports would subtract 0.1 percentage point from GDP, in line with expectations. n nA Reuters poll showed the economy likely expanded 0.7% in the quarter, the fastest pace since the fourth quarter of 2022. That leaves the annual rate at 2.2%, above the Reserve Bank of Australia ‘s estimate of trend growth at 2%. n nThe GDP data is due on Wednesday. n nThe stronger economic performance is one reason that inflation re-accelerated in the third quarter, which dashed all hopes for any more policy easing from the RBA after three rate cuts this year. n nAdam Boyton, head of Australian Economics at ANZ, dropped his call for one more rate cut from the RBA next year given the recent inflation pressures and now sees the central bank on an extended hold. n n”Signs of ongoing inflation pressures in the monthly CPI, GDP growth running around the RBA’s estimate of potential and the RBA’s view that the labour market is tight all suggest the RBA’s Board is likely to be cautious about further easing,” said Boyton. n nSwaps imply the RBA will remain on hold until the second half of next year, with a 70% probability of a rate hike at the end of 2026. n nSeparate released on Tuesday showed the total value of housing stock in Australia jumped to a record high of A$12 trillion ($7.85 trillion) last quarter, boosting household wealth and underpinning consumer spending. n nHome prices have leapfrogged almost 8% this year to new record highs as policymakers worry financial conditions might not be restrictive enough to keep inflation in check. n n($1 = 1.5295 Australian dollars)