Australia's economy grew by just 0.3% in the March quarter, its weakest quarterly expansion since the middle of 2024, the Australian Bureau of Statistics reported, in figures that pointed to a loss of momentum at the start of the year. Annual growth eased to 2.5%, underlining the soft patch confronting the Albanese government as it prepares its next budget.
The headline result was dragged down sharply by trade. Net exports subtracted 0.8 percentage points from growth, as exports fell 1.1% while imports rose 2.1%, a combination that reflected both weaker external demand and resilient domestic appetite for foreign goods. Adverse weather that disrupted mining activity added to the drag on exports.
Beyond trade, the accounts described subdued household and government spending, leaving little to offset the external weakness. Nominal GDP rose 0.6%, and the economy's implicit price deflator increased 0.3%, helped by a 1.1% improvement in the terms of trade as the prices Australia receives for its exports edged up relative to its imports.
The data fed a politically charged debate over the government's economic management. Federal Treasury has assessed that the government's landmark tax overhaul, which curbs negative gearing on future established properties and replaces the 50% capital gains discount with an inflation-indexation model, would not by itself lift growth or productivity, a finding seized upon by critics of Treasurer Jim Chalmers.
Weak productivity has been a persistent concern, and the soft quarter will sharpen questions about how Australia can raise its longer-run growth potential as population gains do much of the work of expanding the overall economy. Living standards, measured by output per person, have struggled to advance.
For policymakers, the slowdown complicates the outlook at a time of global uncertainty, with the war in the Gulf lifting oil prices and clouding the international picture. The figures are likely to feature prominently in the government's budget messaging and in the Reserve Bank of Australia's assessment of how much room it has to support the economy.