GDP growth was 0.4pc in Q2

GDP per capita stalls

Real GDP growth was a little stronger than expected at 0.4 per cent for the June 2026 quarter.

Annual growth slowed from 2½ per cent to 2.1 per cent - which is about the level of the economy's potential, given poor levels of productivity.

Stripping out population growth, real GDP growth per capita was flat in the June quarter.

Investment looks fairly solid, largely related to equipment for data centres.

Nominal GDP growth continued to climb to new highs, as price pressures in the economy have refused to die just yet.

This has partly been due to the climbing share of government spending as a share of GDP, much of which has related to the NDIS. 

The household saving ratio held up in the June quarter - but one suspects this was partly an artefact of cancelled travel plans for the Middle East (something which impacted me personally - was supposed to go to Jeddah for the Saudi Arabia Grand Prix, but had to abort!). 

Similarly household consumption growth held up at 0.4 per cent, as Aussies spent more at home instead, including on electric vehicles as the cost of fuel soared during the Iranian conflict.

Households will come under considerably more pressure over the remainder of 2026, as the cumulative impact of three interest rate hikes begins to bite in the form of more mortgage interest payable.

Finally, Australia's terms of trade fell -1.6 per cent, with further declines appearing fairly likely from these elevated levels. 

The wrap

The Treasurer has attempted to spin the recent data flows as 'good news' as headline inflation was lower over the year to July, and and as workers' share of national income rose to the highest share in a decade. 

Unfortunately for that narrative, markets now expect a further interest rate hike (or perhaps two), and this is likely to poll very badly for the government given the tough economic environment facing many households.

James Foster ran through the figures in more detail here.

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