Australia’s economy is showing resilience despite higher interest rates and war in the Middle East, growing at 0.4 per cent in the June quarter.

Gross domestic product was up 2.1 per cent in the last financial year, the Australian Bureau of Statistics reported on Wednesday.

The result was above consensus forecasts for a 0.3 per cent increase, as well as Reserve Bank projections for annual growth of 1.9 per cent.

After higher-than-expected July inflation data, the hot GDP result will add more pressure on the RBA to further raise interest rates as it struggles to close the gap between supply and demand in the national economy.

Despite the impact of higher interest rates and the US-Iran war, GDP growth accelerated on a quarterly basis from 0.3 per cent in March.

Source: Australian Bureau of Statistics

ABS head of national accounts Grace Kim said the 2.1 per cent annual growth rate was faster than the RBA’s assumed speed limit of 2 per cent, but it was a subdued result by historical standards, as households continued to behave cautiously.

“While increased spending and business investment occurred in pockets of the economy, imports supported much of the growth, moderating its contribution to overall GDP growth,” she said.

Imports of goods rose 2.4 per cent, fuelled by increased purchases of cars and planes. Meanwhile, services imports fell 4.9 per cent as Australians’ travel plans were disrupted by war in the Middle East.

“The number of Australians travelling overseas for the northern hemisphere summer fell for the first time since the Covid-19 pandemic, significantly reducing international travel expenditure,” Kim said.

Household consumption rose 0.4 per cent, with falls in fuel consumption and travel as a result of higher fuel prices.

But the oil crisis also supported growth as consumers flocked to electric vehicles. EV purchases rose 10.3 per cent.

“The rise in electric vehicle purchases may have reflected households taking a longer-term approach to cost-of-living pressures, with some choosing EVs to help reduce ongoing expenses,” Kim said.

Meanwhile, private business investment declined 0.5 per cent, due to a pullback in data centre investment.

GDP per capita was flat over the quarter, growing by 0.7 per cent over the 12 months to June.

Productivity was likewise flat, but fell 0.2 per cent over the year.

Real unit labour costs – a measure closely watched by the Reserve Bank for signs of cost pressures on businesses – rose 0.9 per cent.

-AAP