Australia’s Q1 2025 GDP report dropped on Wednesday, and it was not a pretty sight. Growth came in way below expectations, with the economy expanding just 0.2% quarter-on-quarter, missing forecasts for 0.4% and slowing from the previous quarter’s 0.6% pace.
On a yearly basis, GDP held steady at 1.3%, falling short of the 1.5% forecast and stuck well below the 2.5% growth rate Australia usually sees in better times.
Key points from the Q1 2025 GDP report:
- Government spending went flat, marking the biggest drag on growth since 2017
- Household consumption inched up 0.4% despite lower rates and cooler inflation
- Household savings jumped to 5.2%, the highest since late 2022
- GDP per capita fell 0.2%, putting Australia back in a per capita recession
- Mining output dropped 2.0%, hurt by cyclones and flooding in key states
- Private dwelling investment climbed 2.6%, but business equipment investment slipped 1.7%
- Exports fell 0.8%, led by declines in coal, LNG, and travel services
- Productivity stayed flat from the previous quarter and slid 1.0% year-on-year
Link to Australia’s Q1 2025 GDP Report
The weak numbers showed cracks forming under the surface. Government spending, which had been propping up growth, stalled out. Cyclones and floods hammered mining, tourism, and shipping, hitting key export industries just when they could not afford it.
Consumers stayed cautious too, preferring to save instead of spend even though borrowing costs are down. This points to deeper worries about job security and economic conditions at home. Meanwhile, exports struggled against a backdrop of global trade tensions and bad weather disrupting shipments to China and the rest of Asia.
Australian dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Chart by TradingView
The Australian dollar, which had been clawing back some early losses ahead of the GDP report, popped higher right after the release. It was probably a mix of profit taking and relief that the numbers were not even worse. However, this brief rally quickly reversed as traders digested the disappointing details within the report.
The delayed and sustained selling pressure suggests that while the headline GDP figure of 0.2% wasn’t catastrophically bad, the underlying details painted a more troubling picture. Markets likely focused on the collapse in government spending, the return to per capita recession, and the persistently weak productivity numbers.
The Aussie kept slipping over the next hour, with the biggest losses against the US dollar, Canadian dollar, and Kiwi. It stayed below its post-GDP highs against the yen, Swiss franc, and euro, although it managed to recoup a bit of ground later on.
