Australia third-quarter GDP grows at 0.3%, missing expectations

Sydney Harbour taking in the Harbour Bridge, Opera House and ferries at sunrise during the COVID-19 pandemic on April 20, 2020 in Sydney, Australia.

James D. Morgan | Getty Images News | Getty Images

Australia’s economy grew at a slower-than-expected pace in the third quarter, as elevated borrowing costs and sticky inflation continued to weigh down the slowing economy.

The real gross domestic product rose 0.3% in the three months through September compared with 0.2% in the previous quarter, according to the Australian Bureau of Statistics said on Wednesday. That also missed the Reuters forecast of a 0.4% jump.

On an annualized basis, Australia’s economy rose 0.8%, also missing Reuters estimate of a 1.1% growth, following a 1% rise in the 12 months through June.

“We expect GDP growth will slowly pick up in the coming quarters,” Sean Langcake, head of macroeconomic forecasting at Oxford Economics said in a note.

While an improvement in consumption will be favorable, any recovery will likely be “unspectacular,” Langcake added, expecting the economy to “endure below trend growth in the near term.”

The country’s economy has been on a slowing trend for the past two years, as the Reserve Bank of Australia embarked on a tightening campaign that saw it raise the interest rates by whopping 425 basis points since May 2022.

The RBA has kept its benchmark interest rates at a 13-year high of 4.35% since late last year.

In the third quarter, the country’s headline consumer price inflation slowed sharply to 2.8%mainly helped by the government’s energy bill rebates.

The core inflation, which excluded electricity and automotive fuel prices, albeit at a over two-year low of 3.5%still sits above the central bank’s target range of 2% to 3%.

The RBA governorMichele Bullock had said last week that the core inflation is “too high” to consider interest rate cuts in the near term.

She reiterated that monetary policy will stay restrictive until the bank is “confident” that the underlying inflation is on track to approach the midpoint of target range, namely 2.5%.

The RBA’s next policy meeting is set on Dec.10, where the officials are widely expected to keep the cash rate unchanged.

The central bank’s latest forecasts, published last month, showed it expected the “trimmed mean inflation,” namely core inflation, to ease gradually to 2.5% by late 2026.