Australia’s economy expanded at its fastest pace in nearly three years in the December quarter, with stronger-than-expected growth driven by government spending, private investment and a lift in consumer activity tied to major retail events.
New data from the Australian Bureau of Statistics (ABS) shows gross domestic product (GDP) rose 0.8% in the December quarter, accelerating from 0.4% in the previous quarter. Annual growth climbed to 2.6% from 2.1%, beating economists’ expectations of around 2.3%.
The latest figures mark the 17th consecutive quarter of economic expansion, with growth broadly supported across the economy.
ABS head of national accounts Grace Kim said activity strengthened across most sectors during the quarter.
“There was broad-based economic growth in the quarter, with rises observed in a large majority of industries,” Kim said.
“Public and private demand each contributed 0.3 percentage points to GDP growth.”
GDP per capita also continued to recover, rising 0.4% quarter-on-quarter and 0.9% over the year, marking the strongest annual increase since the December quarter of 2022.
Treasurer Jim Chalmers welcomed the figures, saying the data demonstrated the economy’s resilience during a period of heightened geopolitical and economic uncertainty.
“These really encouraging numbers are a very robust foundation from which we confront intense global economic volatility,” he said.
“The defining story of the Australian economy in 2025 was the pick-up in private sector activity, which these figures confirm.”
Spending lifts, but households keep saving
Despite the stronger headline growth, underlying consumption remained relatively subdued. Household spending increased 0.3% in the quarter, with discretionary spending lifted by strong attendance at sporting events and concerts as well as expanded Black Friday retail promotions.
Spending growth was concentrated in discretionary categories such as hotels, cafés and restaurants (+1.4%), recreation and culture (+0.8%), and furnishings (+2.1%), while essential categories such as electricity and gas fell sharply.
At the same time, households continued to rebuild savings, with the saving-to-income ratio rising to 6.9% from 6.1%, the highest level since September 2022, reflecting ongoing cost-of-living pressures.
Government spending also remained a key contributor, rising 0.9% during the quarter, while private investment increased 0.7%, supported by construction activity tied to renewable energy projects and data centre development.
Inventories also boosted output, contributing 0.4 percentage points to GDP, while net trade detracted 0.1 percentage points, as imports grew faster than exports.
Exports were nevertheless supported by strong commodity demand, including record values for non-monetary gold exports and continued demand for metal ores and minerals from China.
According to Tony Sycamore, market analyst at IG, the stronger GDP result came with some mixed signals for policymakers.
“Australia’s Q4 GDP figures came in with a decent kick, lifting annual growth to 2.6%, comfortably above the RBA’s forecast of 2.3%,” he said.
“That said, there was softness in the underlying details, with household consumption subdued and the savings ratio rising, suggesting cost-of-living pressures are still weighing on spending.”
Sycamore said the data may ease pressure on the Reserve Bank of Australia ahead of its upcoming policy meeting.
“Today’s numbers likely lean toward the RBA holding the cash rate steady at 3.85% in March and waiting for the next quarterly inflation data before making any further moves.”
The central bank has previously warned that stronger private demand in the second half of last year contributed to a renewed lift in inflation pressures, which remain above its 2–3% target band.