Australia’s economy expanded faster than expected in the second quarter of 2025, marking the strongest pace of growth in nearly two years, as household and government spending underpinned activity despite weaker public investment.
Gross domestic product (GDP) rose 1.8% year-on-year according to the Australian Bureau of Statistics, outpacing the 1.6% expected, and accelerating from 1.3% in the first quarter.
On a quarterly basis, GDP grew 0.6%, compared with forecasts of 0.5%.
Tom Lay, ABS head of national accounts, noted: “Economic growth rebounded in the June quarter following subdued growth in the March quarter, which was heavily impacted by weather events.”
The release follows the Reserve Bank of Australia’s decision in August to cut interest rates by 25 basis points to 3.6% while adopting a more optimistic tone in its monetary policy statement.
The central bank noted that global uncertainty remains high, but said greater clarity on U.S. tariffs and international policy responses meant “more extreme outcomes are likely to be avoided”.
Despite the stronger-than-expected Q2 outcome, the RBA revised down its 2025 economic growth forecast to 1.7% from 2.1%, citing weaker public demand in early 2025 and a more subdued productivity outlook.
