The possible cost of Australia's stronger-than-expected growth

Australia's economy is "resilient and robust", Treasurer Jim Chalmers says, after fresh data showed stronger growth, though the figures may also add to pressure on the Reserve Bank of Australia (RBA) to raise interest rates again.

Australia's gross domestic product (GDP) grew by 2.1 per cent — a sign of increased economic activity — in the last financial year, the Australian Bureau of Statistics (ABS) reported on Wednesday.

A growing GDP suggests more business activity and can lead to more jobs being created as demand for goods and services rises.

Chalmers described the results as positive for the nation.

"Growth is as strong, if not stronger, than every major advanced economy," he said in a video posted to social media.

But increases in spending can also mean demand for goods outpaces supply, leading to price increases and contributing to inflation.

The hot GDP result could therefore add more pressure on the Reserve Bank of Australia (RBA) to raise interest rates again as it struggles to close the gap between supply and demand.

Australia's cash rate target is currently 4.35 per cent following three rate hikes this year.

What does the data show?

Despite the impact of higher interest rates and the United States-Iran war, GDP growth accelerated on a quarterly basis from 0.3 per cent in March.

While the 2.1 per cent annual growth rate is faster than the RBA's assumed speed limit of 2 per cent, it was a subdued result by historical standards, as households continued to behave cautiously, ABS head of national accounts Grace Kim said.

"While increased spending and business investment occurred in pockets of the economy, imports supported much of the growth, moderating its contribution to overall GDP growth," she said.

Imports of goods rose 2.4 per cent, driven by increased purchases of cars and planes.

Meanwhile, services imports fell 4.9 per cent as Australians' travel plans were disrupted by war in the Middle East.

"The number of Australians travelling overseas for the northern hemisphere summer fell for the first time since the COVID-19 pandemic, significantly reducing international travel expenditure," Kim said.

Household consumption rose 0.4 per cent, with falls in fuel consumption and travel due to higher fuel prices.

But the oil crisis also supported growth as consumers flocked to electric vehicles. EV purchases rose 10.3 per cent.

"The rise in electric vehicle purchases may have reflected households taking a longer-term approach to cost-of-living pressures, with some choosing EVs to help reduce ongoing expenses," Kim said.

Meanwhile, private business investment declined 0.5 per cent, due to a pullback in data centre investment.

GDP per capita was flat over the quarter, growing by 0.7 per cent over the 12 months to June.

Productivity was likewise flat but fell 0.2 per cent over the year.

Real unit labour costs — a measure closely watched by the Reserve Bank for signs of cost pressures on businesses — rose 0.9 per cent.

Impact on RBA

David Bassanese, chief economist at financial firm Betashares, said the "jury remains out on a September rate decision".

He described Wednesday's figures as slightly better than market expectations but still leaving Australia's economy "in a rut".

"The saving grace from the economic rut revealed by these numbers is they do not compel the RBA to raise rates, but they also do not rule out a hike in the future," he said in a statement.

"My base case is that September will not bring a rate increase, as the RBA will want to see more evidence on inflation and the moderation in house prices."

The RBA will next meet to discuss any changes to the cash rate target on 29 September.

— With additional reporting by the Australian Associated Press.

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