Australia Economic Outlook

Outlook Q3 2025

Australia’s economic activity rebounded in the June quarter, with GDP growing by 0.6% – the highest annual growth rate since September 2023. The private sector has become the main driver of growth, led by a strong result for household spending. However, the overall pace remains below trend, and the recovery is uneven across sectors. Lower interest rates and Stage 3 tax cuts have boosted consumer sentiment, but business investment is still subdued and global headwinds persist.

Australian overview

Australia’s economy rebounded in the June quarter, but growth remains below trend and the recovery is uneven.

GDP grew by 0.6% in Q2 2025

the highest annual growth rate since September 2023.
Household consumption rose 0.9%

led by discretionary spending and improved sentiment.
Business investment remains subdued

while housing investment picked up by 0.5%.
Unemployment held steady at 4.2%

in August, with the labour market showing resilience.
Public spending made no net contribution to growth

as increased government consumption was offset by a decline in public investment.

Global landscape

Global growth is subdued, with ongoing trade policy uncertainty and geopolitical risks shaping the outlook.

Trade tensions and policy uncertainty

continue to weigh on global economic activity.
Asia-Pacific region faces headwinds

but some economies (e.g. Taiwan, Singapore) are outperforming expectations.
Inflation is moderating globally

though risks remain due to energy prices and supply chain pressures.
Equity markets have reached record highs

but investor sentiment is fragile amid ongoing volatility.
Central banks are easing policy

but fiscal fragilities and rising public debt remain key concerns.

Summary forecast

* Values at end of period
# Actual values
^ Forecast values

KPMG forecasts of key macroeconomic indicators

Indicator	2024 (actual)	2025 (forecast)	2026 (forecast)	2027 (forecast)
Real GDP (average annual growth)	1.0%	1.8%	2.2%	2.1%
Real GDP (year-ended growth)	1.3%	1.9%	2.1%	2.2%
RBA cash rate	4.35%	3.35%	3.10%	3.10%
Headline CPI	2.4%	2.7%	2.7%	2.5%
Core CPI	3.2%	2.8%	2.7%	2.6%
AUD/USD*	0.65	0.66	0.66	0.66