Mild recovery after a bumpy period
Data released this week show that Australian Bureau of Statistics (ABS) recorded real GDP growth of 0.4% in the September 2025 quarter. That brings the annual increase to 2.1%, up from a feeble 0.8% around this time last year.
Still, the quarterly pace fell short of expectations — and when adjusted for population growth, real GDP per capita barely budged.
Data-centre boom gives business investment a lift
A major driver of the rebound was private-sector investment, particularly a sharp surge in data-centre construction across New South Wales and Victoria.
Investments in data infrastructure contributed roughly half a percentage point to overall GDP growth in the quarter — the fastest quarterly rise in private investment in more than four years.
This rush reflects Australia’s growing position in global demand for digital infrastructure and cloud/AI-ready capacity.
Households spending more — but cautiously
On the consumer side, households increased spending on essentials — utilities, rent and other cost-of-living items — pushing up consumption modestly.
Still, there was a drop in discretionary spending (non-essentials), while the household savings ratio ticked up to 6.4%.
The uptick in essential spending suggests rising income or stronger demand for everyday services, even amid cost pressures.
Fragile ground: private-sector still narrow base, and inflation looms
Despite the rebound, analysts warn the recovery remains fragile. Australian Industry Group pointed out that many sectors — including manufacturing, retail, professional services — remain weak or contracting.
Meanwhile, inflation has picked up: consumer price growth reached 3.8% in October, raising concerns that further economic activity may stoke more inflation.
Lower private-sector productivity growth — only about 0.8% over the past year — remains a structural concern.
What’s next — cautious optimism, but uncertainty looms
For now, the blend of renewed investment and household resilience offers a glimmer of stability after a sluggish period. As one economist put it, after “anemic” growth a year ago, the economy is “coming back to life.”
But with growth still narrowly based, and inflation simmering — the Reserve Bank of Australia (RBA) may hold off on rate cuts, or even consider hikes if price pressures don’t ease.
What happens next will depend on whether investment broadens beyond data-centres, whether household demand strengthens, and whether policymakers can balance growth with price stability.
7 years in the field, from local radio to digital newsrooms. Loves chasing the stories that matter to everyday Aussies – whether it’s climate, cost of living or the next big thing in tech.
