Data centre spending spree and housing boom drive economic growth
Australia's economy grew by 0.4 per cent in the September quarter. (ABC News: Michael Clements)
In short:
Australia's economy is growing at an annual pace of 2.1 per cent, up from 2 per cent in the June quarter.
Rooftop solar electricity generation and consumption have been included in the National Accounts for the first time.
The ABS estimates the household sector saved just over $3 billion, or $125 per person, on electricity costs in 2024-25 by installing rooftop solar.
What's next?
The Reserve Bank Board will hold its next interest rate meeting on 8-9 December.
Australian's economy grew by 0.4 per cent in the September quarter, following growth of 0.7 per cent in the June quarter.
It means the economy is now growing at an annual rate of 2.1 per cent, up from 2 per cent in the middle of the year.
Growth in the September quarter was driven by private investment and household consumption, while changes in inventories detracted from growth as inventories were run down to support exports.
Grace Kim, ABS head of national accounts, said GDP per person was flat for the quarter as economic growth matched population growth.
In the Reserve Bank's most recent forecasts, the RBA was forecasting the economy to be growing at an annual pace of 2 per cent by the end of December.
Investment in data centres drives private investment
Ms Kim said private investment contributed 0.5 percentage points to GDP growth in the September quarter.
That was driven by machinery and equipment investment, which rose 7.6 per cent. The rise aligned with an increase in imports of capital goods.
"The rise in machinery and equipment investment reflects the ongoing expansions of data centres," Ms Kim said.
"This is likely due to firms looking to support growth in artificial intelligence and cloud computing capabilities."
Increased investor demand for housing fed into high real estate turnover and a rise in dwelling construction.
Housing investment contributed 0.2 percentage points to GDP growth in the September quarter.
Public investment grew by 3 per cent in the September quarter, rebounding from a 3.5 per cent fall in the June quarter.
Public corporations drove the rise, with investment growth in renewable energy, water, telecommunications and rail transport projects.
State and local government investment grew 1.4 per cent in the quarter but remained 2.4 per cent lower than a year ago.
What do economists say?
David Bassanese, BetaShares chief economist, says people shouldn't be distracted by the softer-than-expected 0.4 per cent growth in the September quarter.
He says business investment, dwelling investment, and public demand all rebounded strongly in the quarter, with total domestic demand expanding by a solid 1.2 per cent, more than double June's 0.5 per cent pace.
So why the soft GDP print?
He says the principal culprit is the rundown in inventories.
"The lift in demand appears to have outpaced the ability of firms to supply it, forcing businesses to meet customer needs by dipping into stock," he said.
"From the Reserve Bank's perspective, this combination of broad-based demand strength and an inability of production to keep up hints at the economy pressing against inflation-prone capacity constraints.
"Accordingly, the RBA will likely take little comfort from the slower headline GDP figure.
"If anything, the weakness reflects supply limits, not falling demand. And because depleted inventories will need replenishing, the economy enters the December quarter with decent underlying momentum.
"The implication: today's GDP report likely reduces, rather than increases, the RBA's inclination to cut rates anytime soon," he said.
CBA economist Belinda Allen said at this pace Australia's economy has probably reached its current speed limit.
"Looking ahead to next week's RBA meeting and today's GDP reinforces recent concerns over demand growth in the economy given the lower speed limits and potential upward pressure on inflation from here," she said.
"We expect the tone in the December meeting to take a further step in the hawkish direction. If trimmed mean [underlying] inflation is higher than expected in the December quarter expect the RBA to take a further leap in February to pivot to rate hike discussions."
Rooftop solar electricity saved households $3 billion in 2024-25
Estimates of rooftop solar electricity generation and consumption have also been included in the Australian National Accounts for the first time.
The ABS says the inclusion of rooftop solar estimates in the National Accounts has had minimal impact on key aggregates such as GDP, but it is notable in its components.
It estimates that in 2024-25, the household sector saved just over $3 billion, or $125 per person, on electricity costs by installing rooftop solar.
The ABS says rooftop solar electricity production has grown to be more than 20 times higher than in 2010-11 and now accounts for approximately 8 per cent of total economy-wide electricity generation.
It says households consume about half of the rooftop solar electricity they generate and send the remainder to the grid.
It says rooftop solar installation costs per kilowatt of installed capacity have fallen by 75 per cent from 2010-11 to 2024-25, driven by better technology and large-scale production.
"Since 2010, supported by government incentives and improving technology, rooftop solar installations have surged," the ABS says.
"Australia now leads the world in per capita household solar, with more than 4 million homes – approximately one in three – equipped with solar panels," the ABS says.