Australia’s economy ended 2025 on a solid footing, with stronger productivity and broad-based growth offsetting softer consumer spending, new national accounts show.
The Australian Bureau of Statistics (ABS) reported GDP rose 0.8% in the December quarter and 2.6% over the year (seasonally adjusted, chain volume).
ABS head of national accounts Grace Kim said there was “broad based economic growth in the quarter, with rises observed in a large majority of industries. Public and private demand each contributed 0.3 percentage points to GDP growth.”
“GDP per capita increased for the fourth consecutive quarter and is now 0.9 per cent higher than a year ago, the highest through the year growth since December quarter 2022,” Kim said in a media release.
Household consumption grew 0.3% in Q4 and 2.4% over the year – weaker than many economists had pencilled in.
Commenting on the GDP Q4 results, Westpac senior economist Pat Bustamante said the “downside surprise was concentrated in consumption; elsewhere, the data were largely as expected.”
Discretionary spending rose 0.4%, helped by an expanded Black Friday sales period and strong attendance at sporting and concert events. Essential services spending grew 0.4%, but this was more than offset by a 0.5% fall in essential goods, as expenditure on electricity, gas and other fuels slid 9.5%. Lower electricity usage and government rebates pushed out‑of‑pocket power bills down; those rebates are recorded as government spending.
State and local government expenditure rose 1% on the back of electricity rebates and higher employee costs in health, education and police, while Commonwealth spending increased 0.8%.
Household disposable income rose 1.8% in the quarter, well ahead of the 1.1% nominal lift in spending, driving the saving ratio up to 6.9% – its highest level since September 2022. Compensation of employees climbed 1.4% in Q4 to be 6.5% higher over the year.
Domestic demand (spending by consumers, businesses and governments) rose 0.5% in Q4 and 2.9% over the year – the strongest annual pace since mid‑2018 outside the pandemic period.
Westpac noted there was “no need for a ‘handover’ with both the private and public sectors contributing to the pick-up in domestic demand.”
Seventeen of 19 industries lifted output. Mining production increased 2.6% as operations resumed after scheduled maintenance, adding 0.3 percentage points to GDP, while agriculture rose 2.5% on favourable conditions and strong overseas demand for Australian meat. Mining profits jumped 5.7%, helping push overall corporate profits up 2.2% – the largest quarterly gain since March 2023.
Private investment rose 0.7% – the fifth straight quarterly increase – after a 3.2% surge in September, with high levels of spending on data centres, aircraft and housing construction. Public investment added another 0.9%, driven by state transport infrastructure and higher Commonwealth defence outlays.
Critically, supply-side performance improved. Westpac estimates “total productivity rose 1%yr in Q4, with market‑sector productivity (ex‑mining) up 1.1%yr.” That lift “has helped slow growth in the economy’s cost base, with growth in unit labour cost easing to below 4%yr for the first time since the pandemic,” bringing cost pressures back toward pre‑COVID norms and supporting the Reserve Bank’s efforts to contain inflation – provided the productivity gains can be sustained.
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