GDP up just 0.2% as weather disruptions and spending drop weigh on outlook
Australia’s economy began 2025 with weaker-than-expected growth, as a drop in public spending and export activity slowed momentum, strengthening the case for further policy easing by the Reserve Bank of Australia (RBA).
According to data released by the Australian Bureau of Statistics (ABS) on Wednesday, gross domestic product (GDP) grew by 0.2% in the March quarter. That result fell short of economists’ forecasts of a 0.4% rise and was slower than the growth recorded at the end of 2024. On an annual basis, the economy expanded by 1.3%, below the expected 1.5%. 
“Public spending recorded the largest detraction from growth since the September quarter 2017,” said Katherine Keenan, ABS head of national accounts. “Extreme weather events reduced domestic final demand and exports. Weather impacts were particularly evident in mining, tourism and shipping.”
The Treasury estimates that natural disasters have already caused $2.2 billion in lost output in 2025.
The figures place GDP well below its 20-year pre-pandemic average of nearly 3%, adding to concerns about the economy’s underlying strength. The RBA recently reduced the cash rate to 3.85%, citing weak global conditions and warning it could act further if growth remains soft.
To meet its 2025 growth forecast of 2.1%, the central bank needs the economy to grow by 0.7% in the current quarter – something not achieved since mid-2022.
Market expectations for a July rate cut have risen, with traders pricing in nearly a 90% chance of a 25-basis-point reduction. Futures markets suggest the cash rate could drop to around 3.1% by year-end.
The data covers a period leading up to US President Donald Trump’s April tariff policy announcement, which added fresh uncertainty to the global trade environment. Despite a US-China truce on further tariffs, analysts say the international outlook has become more fragile.
Productivity remains a weak spot, with output per worker stuck near levels not seen in decades. GDP per capita has declined in nine of the last 11 quarters, suggesting a fall in living standards.
While the Albanese government has faced criticism over rising living costs and housing pressures during its first term, the outlook has slightly improved since March. Price pressures have eased, and the RBA has delivered two rate cuts so far this year, with more flagged.
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