Peak bodies across Australia are sounding the alarm as Australia’s economic growth softened in the March quarter, lifting just 0.2 per cent according to new data from the Australian Bureau of Statistics (ABS).
This is down from 0.6 per cent recorded in the December quarter, with the annual rate of change at 1.3 per cent in March 2025.
ABS head of national accounts Katherine Keenan said public spending recorded the largest detraction from growth since the September quarter in 2017.
“Extreme weather events reduced domestic final demand and exports,” she said. “Weather impacts were particularly evident in mining, tourism and shipping.”
GDP per capita fell 0.2 per cent this quarter, following a 0.1 per cent rise in the December 2024 quarter.
Across the charts, the ABS reported that there was no growth in Government final consumption expenditure in the March quarter, with private investment up 0.7 per cent and public investment dropping by 2 per cent.
Of interest to retailers, household spending was up 0.4 per cent in the March quarter following a revised 0.7 per cent rise in the December quarter.
“Growth was relatively slow across most household spending categories following stronger than usual spending during the December quarter’s retail sales events,” Keenan from the ABS said.
Spending on essentials like food and rent continued to be among the highest contributors to household spending growth. Households spent more on electricity, gas and other fuels, in part due to warmer than average weather during the quarter. The decline in electricity rebates available to households during the quarter also contributed to the rise in spending by households. The electricity rebates are treated as a shift from household to government spending in the national accounts.
Discretionary spending on recreation and culture also contributed to the growth this quarter.
Australian Industry Group CEO Innes Willox said ongoing weakness in the private sector has seen the economy stall in 2025, adding this is putting the focus back on immediate policy reforms needed to get investment and productivity moving again.
“We cannot waste any more time getting our vital policy settings right and embarking on meaningful economic reform,” Willox said.
"The government stimulus that accounted for the majority of growth in 2024 has now tapered off. Without a material uplift in private sector investment and productivity to compensate, this has left the economy listing.”
Willox added it is natural and appropriate that government spending is now moderating, but said the dismal conditions in the private sector need to be urgently corrected to take up the slack.
"With the impact of US trade barriers about to flow through, coupled with our paralysis on real productivity reforms, Australia is at risk of becoming an economic sitting duck,” Willox said.
"Governments can no longer hope a private sector recovery will simply materialise on its own. Getting productivity and investment moving – and doing so right now – must be at the forefront of minds in Canberra and around our state capitals.”
The Council of Small Business Organisations Australia (COSBOA) also reacted to the new data. COSBOA CEO Luke Achterstraat said the data paints a clear picture of an economy under pressure, noting that business owners – particularly small businesses – are bearing the brunt of rising costs, policy uncertainty and subdued consumer demand.
“Private sector investment is stalling. Productivity is stagnant. Small businesses are doing everything they can, but the settings are not helping them to grow,” Achterstraat said.
According to the council, Australia’s 2.5 million small businesses make up 97.7 per cent of all Australian businesses, employ more than 5.1 million people, and contribute $500 billion to the national economy each year. In regional and remote communities, they are often the backbone of local economic activity.
But COSBOA claimed small businesses are facing growing cost pressures from every direction, including rising energy prices, rent, insurance premiums and input costs, while managing increased regulatory complexity.
“Employers are also facing higher workers compensation premiums, increased payroll tax, and another legislated rise in the superannuation guarantee from 1 July,” Achterstraat said.
“These are businesses already operating on razor-thin margins. Many are struggling just to break even.”
COSBOA is calling on the federal government to reduce the small business company tax rate from 25 per cent to 20 per cent and setting the instant asset write-off as permanent, alongside other measures.