Australia’s Economy Accelerates in Q4 2025 as Household Spending and Government Investment Rise

Australia’s economy expanded at its fastest pace in three years during the fourth quarter of 2025, supported by steady private consumption and increased government investment in infrastructure and defense. According to data released Wednesday by the Australian Bureau of Statistics (ABS), the country’s gross domestic product (GDP) grew 2.6% year-on-year in the three months ending December 31. The result exceeded market expectations of 2.1% growth and marked a notable improvement from the previous quarter.

On a quarterly basis, Australia’s GDP increased by 0.8%, slightly outperforming forecasts of 0.7%. The stronger-than-expected growth highlights the resilience of the Australian economy despite lingering inflation concerns and elevated interest rates.

Household spending played a key role in supporting economic activity. Consumer expenditure rose 0.3% during the quarter, helped by seasonal shopping events such as Black Friday as well as a busy calendar of sporting competitions and large-scale concerts that boosted discretionary spending. However, government electricity rebates partially limited consumer outlays. When excluding these energy subsidies, household spending would have increased by approximately 0.5% for the quarter.

The data also showed that household savings increased to 6.9%, up from 6.1% in the previous quarter, suggesting that Australian consumers still maintain a financial buffer and potential spending capacity heading into 2026.

Government expenditure further contributed to economic growth, rising 0.9% during the quarter. Federal investment in major transport infrastructure projects and defense equipment was a major driver of this increase.

Australia’s mining sector also delivered strong performance, expanding by 2.6% during the quarter and contributing about 0.3 percentage points to overall GDP growth. Elevated global commodity prices helped boost mining output and export revenues, reinforcing the sector’s importance to the national economy.

Despite the positive economic data, concerns remain about inflationary pressure. The stronger growth figures come shortly after the Reserve Bank of Australia (RBA) raised interest rates by 25 basis points in February in an effort to control a late-2025 rebound in inflation.

Economists suggest the central bank may maintain a tightening bias. Analysts at Capital Economics noted that while productivity growth slightly exceeded the RBA’s projections and unit labor cost growth eased, overall economic activity appears to be running above the economy’s potential pace.

RBA Governor Michele Bullock also indicated earlier this week that policymakers have not ruled out another interest rate increase as soon as March if inflationary pressures persist. The central bank’s next decisions will likely depend on incoming inflation data and whether strong economic growth continues into early 2026.