Australia’s economy managed to grow just 0.2% in Q1 2025. This information is derived from the most recent national accounts, which were released by the Australian Bureau of Statistics. This figure disappointed the consensus forecast, which expected a lackluster 0.4% quarter-over-quarter gain. That marks a break from the growth of 0.6% in the prior quarter, which was in the fourth quarter of 2024.
With an annual inflation rate of only 1.3% y-o-y in Mar-25, Australia is clearly the most stable economy of the three. That figure is well below the 1.5% forecasted. The Reserve Bank of Australia (RBA) was exceptionally sanguine in a forecast it laid out in its May Statement on Monetary Policy. It predicted a 0.4% growth rate.
Lee Sue Ann, economist at UOB Group, gave her outlook on the weal economic condition.
“GDP rose 0.2% q/q in 1Q25, lower than consensus expectations for a 0.4% q/q gain, and growth pace of 0.6% q/q in 4Q24. It was also weaker than the Reserve Bank of Australia (RBA)’s 0.4% forecast stipulated in the May Statement on Monetary Policy. From a year earlier, the economy expanded by 1.3% y/y, unchanged from 4Q24, but also below expectations of 1.5.” – UOB Group’s economist Lee Sue Ann
The numbers tell the story that the Australian economy has underperformed. It has stagnated relative to its own history. This growth rate of just 0.2% q/q reflects some serious underlying problems that will make it very difficult to grow at such a modest pace going forward.
In addition, uncertainty caused by continued trade tensions is likely to be harmful to both consumption and business investment all throughout Australia. This unprecedented environment has challenged researchers and experts across the country to reassess their optimistic GDP growth forecasts. They have lowered that initial 1.9% projection down to 1.8% now for 2025.
After shock after shock to macroeconomic expectations, analysts are responding to the ongoing weakening economic indicators. They expect greater easings by the RBA through monetary policy are inevitable in the months ahead. Expectations are for a pair of 25 bp rate cuts. These cuts, scheduled for August and November 2025, will focus on stimulating economic activity.