The Australian Bureau of Statistics (ABS) released data today indicating that economic activity was stronger than expected, surpassing the Reserve Bank and economists’ predictions of 0.5% quarterly growth. This follows a weaker 0.3% growth in the March quarter, which was affected by Tropical Cyclone Alfred.

“The economy saw a recovery in the June quarter after sluggish growth in March due to weather-related disruptions,” according to Tom Lay, head of national accounts at ABS.

According to the ABS, the key contributors to the robust quarter were a 0.9% increase in household spending and a 1% rise in government expenditure.

Household spending increased as Australians took extended holiday breaks over Easter and Anzac Day, which coincided this year, along with heightened demand from year-end sales and increased healthcare needs due to an intense flu season.

Lay noted that “End-of-year sales and the introduction of new products led to higher discretionary spending on goods such as furnishings, household equipment, vehicles, and recreational and cultural items.”

“Households took advantage of the proximity of Easter to Anzac Day to extend their holiday break, resulting in rises in discretionary services such as hotels, cafes and restaurants and recreation and culture services.”

Australians also bought more food as major supermarket chains, including Coles and Woolworths, increased their promotional sales.

The Albanese government’s spending, excluding defence investments and including costs like holding the federal election in May, was the largest contributor to growth.

High demand for health services also led to more spending on the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme.

Trade also increased on the back of iron ore and LNG export rebound after the effects of severe weather in the March quarter.

A rise in short-term visitors, particularly those visiting friends and family in Australia, led to an increase in service exports.

Private investment remained relatively unchanged, increasing 0.1 per cent in the June quarter.

The ABS said the largest detractor from growth was the 3.9 per cent decrease in public investment — the largest fall, excluding the COVID-19 period, since September 2017.

This was due to state and territory governments spending less on transport and health infrastructure.

Treasurer Jim Chalmers said today’s results were equal to the fastest quarterly growth in almost three years and the fastest annual growth rate in almost two years. 

“Today’s National Accounts show Australia’s economy is gathering momentum in the face of global economic uncertainty,” he said.

But experts questioned the treasurer’s optimism. 

CreditorWatch chief economist Ivan Colhoun said the figures were largely driven by temporary factors like the weather events last quarter, federal election spending and end-of-financial-year sales.

“At face value, this outcome could be seen as confirming the RBA’s anticipated strengthening in economic growth, though I’m not so sure about that,” he said.

“There was a host of special factors impacting the data this quarter, most of which acted to boost growth temporarily.”

Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said while the results were “encouraging confirmation” that worse global uncertainty did not have a heavy toll on the economy, it may be a “high watermark” for growth this year.

“The June quarter benefited from a rebound from a soft first quarter, business and consumer confidence are still a little shaky, and the labour market appears to be cooling,” he said.