Commuters cross the street at Town Hall in Sydney. — Reuters
SYDNEY: Australia's economy grew at the fastest annual pace in two years in the September quarter, with strength across business investment and consumer spending suggesting little scope for more policy easing, data showed on Wednesday.
Inflation measures in the report also remained high, which led to strong nominal growth and underscored price pressures just as the central bank chief said the economy could be already at its potential growth limit.
Data from the Australian Bureau of Statistics showed real gross domestic product (GDP) rose 0.4% in the third quarter, slowing from an upwardly revised 0.7% in the previous quarter. However, the increase missed forecasts for a gain of 0.7%.
The quarterly growth slowed because of an outsized drag in inventories which took off 0.5 percentage points from GDP. But, in a sign of underlying strength, domestic final demand picked up sharply to add 1.1 percentage points to growth.
Annual growth accelerated to 2.1%, the fastest pace since mid-2023 and above the RBA's estimate of trend growth of 2%.
The Australian dollar was largely steady at $0.6568, while three-year government bond futures recouped earlier losses to move up 2 ticks to 96.07. Swaps imply the Reserve Bank of Australia will remain on hold until late next year, pricing in a 75% probability for a rate hike by the end of 2026.
The bureau said the quarterly rise was driven by private investment and household consumption. The household savings ratio climbed to 6.4%, from an upwardly revised 6.0%, suggesting consumers still had plenty of spending power.
Measures of inflation in the report showed the deflator for domestic demand up a solid 1.3% in the quarter. Nominal GDP jumped by 1.7% in the quarter. - Reuters
