Australia’s economy slows as households tighten their belts, while AI investment surges |
Australia’s economy grew by 0.3% in the first three months of 2026, slowing from 0.9% growth at the end of 2025, according to the latest Australian Bureau of Statistics figures.
Over the year to March, gross domestic product (GDP) rose 2.5%. But GDP per person – our total GDP, divided by our population – actually fell 0.1% in the quarter. This shows Australians were not necessarily feeling better off, despite the economy still growing overall.
The weaker-than-expected growth result is likely to reinforce the likelihood of the Reserve Bank leaving interest rates unchanged at its June meeting, after lifting rates in February, March and and May.
While inflation remains a concern, today’s figures suggest those rate rises were already beginning to weigh on household spending and economic activity.
Higher fuel prices took a toll
The Middle East war, which began on February 28, had a clear effect on Australia’s economy through higher fuel and fertiliser prices.
The Australian Bureau of Statistics (ABS) noted automotive fuel prices rose sharply towards the end of the March quarter. The federal government’s fuel discounts only started on April 1.
Households responded by spending more on essentials and cutting back elsewhere. Discretionary spending was very weak, suggesting many consumers were becoming more cautious.
Spending on electricity, gas and other fuels also rose sharply after energy rebates ended, while spending on operating vehicles increased amid concerns about petrol and diesel supplies.
Which parts of the economy grew?
The strongest part of the economy was........