Investing.com-- Australia’s economy grew less than expected in the third quarter despite increased government subsidies, as household spending remained flat and export prices fell due to slowing global demand for commodities.
Gross domestic product rose 0.3% quarter-on-quarter in the three months ended September 30, data from the Australian Bureau of Statistics showed on Wednesday. The reading was below the market expectations of 0.5%, but slightly above the previous quarter's rise of 0.2%.
Year-on-year GDP grew 0.8%, lower than expectations of 1.1%, and slower than the 1.0% growth seen in the prior quarter.
Household spending was flat in the September quarter following a 0.3% fall in June.
"The largest detractor from growth was for electricity and gas spending due to the implementation of the energy bill relief rebates," Katherine Keenan, ABS head of national accounts, said in a statement.
Inflation has eased significantly from pandemic-era highs, with the latest quarterly consumer price index (CPI) data showing a 2.8% annual rise, comfortably within the Reserve Bank of Australia's (RBA) target range. However, core inflation remains sticky due to persistent wage pressures
Export prices fell 2.6% in September, as global demand for bulk commodities continued to slow. Industrial metals are a key driver for Australia's economy.
“The quarterly growth in domestic prices was the lowest observed since March 2021. The growth this quarter reflected softening goods prices in the economy alongside more resilient services prices reflecting high demand for labour and costs of essential services such as rent, education and health,” the ABS' Keenan said.
The drag was despite an increased government spending. Social benefits paid to households increased this quarter as households received energy cost relief rebates.
Public investment also rose 6.3% in the September quarter, after three consecutive quarterly falls. This was driven by higher general government investment from a rise in defence equipment imports and investment in hospitals and roads.
Steady expansion in the Australian economy gives the Reserve Bank of Australia more headroom to keep interest rates higher for longer, especially due to sticky inflation.
Recent commentary from analysts suggests potential rate cuts could begin in mid-2025, depending on inflation and growth dynamics.