Key points

• Q4 GDP growth was 0.6% q/q and 1.3% y/y (NAB 1.4%, Consensus 1.3%, RBA 1.1%) with both public and private demand contributing to growth
• While a little above the RBA’s expectation, we don’t see anything narrative shifting in today’s data
• Household consumption rose 0.4% q/q – better than recent quarters but not strong yet
• Public demand remained a support for growth, with quarterly growth 0.9% q/q and 5.7% y/y.

Overview & implications

GDP growth was 1.3% over 2024 (NAB 1.4%, Consensus 1.3%, RBA 1.1%). Despite the small upside surprise to the RBA’s recent forecast, we do not see this as narrative shifting. Consumption growth was in line with the RBA’s forecast at 0.4% q/q and 0.7% y/y. Today’s data is consistent with the assessment that growth is past its trough and should pick up further helped by an improvement in real household income. Real household income growth was 1.8% over 2024, near its pre-pandemic average of 2.0% y/y, after a period of declines alongside elevated inflation. The net savings rate was 3.8%, below the 5-6% that prevailed prior to the pandemic, but up from its low of 2.4%.

GDP per capita rose 0.1% q/q, its first rise in seven quarters, as growth drivers rebalance with population growth past its peak and per capita spending picking up. Domestic final demand growth was 0.5% q/q, with a positive contribution from net trade in the quarter but remains stronger than GDP growth in year-ended terms at 2.1%. Public and private demand both contributed positively to growth in the quarter.

Looking forward, we continue to expect growth of 2¼% over 2025. That would reflect a return to trend after a period of rebalancing that has moved the economy to better balance and so is not necessarily threatening to the inflation outlook. NAB’s view is that the RBA’s inflation outlook remains a little too cautious, and that will be enough to support gradual policy normalisation as the RBA seeks to support a healthy labour market and avoid unnecessarily leaning against growth outcomes. We expect the next cut in May and a terminal policy rate of 3.1% in 2026. Signs of retightening in the labour market or less benign inflation would delay easing, and while the focus will remain on CPI data, it is worth noting that productivity growth remains weak and unit labour cost measures remain elevated in today’s data, which support the RBA caution that disinflation could stall.

For further details please see the Australian Economic Update – GDP Q4 2024