GDP growth accelerates in Q2

GDP reading: GDP growth improved to 0.6% on a seasonally adjusted quarter on quarter basis in the second quarter from 0.3% in the first quarter, beating market expectations. Household consumption surged, lifted partly by stronger spending on both discretionary and essential goods during the Easter and ANZAC holidays. Government expenditure also increased, driven by higher social benefit payments and greater defense outlays. In contrast, fixed investment performed poorly and the contribution of net trade was only minorly positive.

Private and public spending drive expansion: Private consumption growth hit an over one-year high of 0.9% in the second quarter (Q1: +0.4% s.a. qoq). Government spending picked up to a 1.0% expansion in Q2 (Q1: +0.3% s.a. qoq). Meanwhile, fixed investment contracted 0.8% in Q2, marking the worst result since Q2 2020 (Q1: -0.1% s.a. qoq). On the external front, exports of goods and services were up 1.7% (Q1: -0.7% s.a. qoq) thanks to higher exports of mining commodities amid reduced weather-related disruptions. In addition, imports of goods and services growth picked up to 1.4% in Q2 (Q1: +0.1% s.a. qoq).

Solid GDP growth to continue: The economy should grow at a similar rate to Q2 going forward, thus performing close to its potential after several quarters of depressed readings by historical standards; Central Bank rate cuts will partly drive the improvement.

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