Australia's quarterly GDP figures due for release this morning are expected to show the economy expanded by approximately 0.3 percent in the first three months of 2026, representing the softest growth recording since 2024. The result, which amounts to an annualised growth rate of just over one percent, would confirm a return to the sluggish economic conditions that characterised much of the previous two years.
Economists from Westpac note that the only genuine area of strength in the quarter was equipment investment, driven primarily by the data centre building boom that is ramping up across Australia. Outside of this technology-driven bright spot, the economic picture is uniformly soft, with public demand appearing essentially flat and the mining sector facing production challenges.
The consumer sector has begun to feel the impact of the three interest rate hikes delivered this year, combined with the energy crisis triggered by the closure of the Strait of Hormuz in early March. However, economists note that the full force of these twin shocks will not be reflected until the June quarter data, which is looking markedly weaker.
In per capita terms, the 0.3 percent headline figure actually represents a slight contraction, meaning that the average Australian is becoming economically worse off even as the overall economy continues to expand. This distinction between headline and per capita GDP has been a persistent feature of Australia's recent economic performance, driven by strong population growth masking underlying weakness.
Some forecasters are predicting an even weaker result, with some calling for flat growth or even a small negative number for the quarter. A flat or negative result would raise the prospect of a technical recession in the June quarter, though most analysts believe that outcome remains premature at this stage.
The Reserve Bank of Australia will be closely watching the GDP figures as it prepares for its next interest rate decision. The bank faces a difficult balancing act between containing inflation, which remains above target, and avoiding pushing the economy into a deeper slowdown through further monetary tightening.
The full impact of the Strait of Hormuz closure and the associated energy price surge is expected to land squarely in the second quarter figures, which will not be released until early September. Economists warn that the June quarter is currently tracking very flat, raising the risk that the economic outlook may deteriorate further before any improvement materialises.