Australia’s Q1 2025 GDP Misses Forecasts Amid Weak Spending and Export Woes

Australia’s economy underperformed expectations in Q1 2025, with GDP rising just 1.3% year-on-year, according to the Australian Bureau of Statistics. The figure was below the forecasted 1.5% and matched the growth seen in the previous quarter. On a quarterly basis, GDP rose only 0.2%, trailing the anticipated 0.4% and marking a slowdown from Q4’s 0.6% increase.

Several factors contributed to the weak performance. Domestic spending remained soft, with household consumption growing more slowly than before. Public sector spending was largely flat, offering little support to growth. Additionally, extreme weather—cyclones and wildfires—negatively impacted key sectors such as mining, tourism, and shipping.

Exports were another major drag. Disruptions caused by weather were compounded by trade tensions between the U.S. and China, two of Australia’s largest export markets. These issues were flagged earlier this week by poor current account figures and weak contributions from net exports. Businesses also reported a decline in gross operating profits.

Although tensions between Washington and Beijing began easing in May, which may support a stronger Q2 rebound, the Reserve Bank of Australia (RBA) remains cautious. In its May meeting, the RBA warned of slower economic growth amid persistent global trade uncertainty.

The sluggish Q1 performance increases the likelihood of further monetary easing. The RBA has already implemented 50 basis points in rate cuts this year, and continued economic softness could prompt additional action to support growth.

Despite the current slowdown, economists still expect a gradual recovery in 2025, driven by improved global conditions and potential policy support. However, near-term risks remain elevated, particularly in trade and weather-related disruptions.