Australia’s Economy Gathers Momentum as Fresh Storms Brew

Australia’s economy grew at a faster pace in the fourth quarter of 2024, shrugging off the threat of a recession just as the global outlook has dimmed amid a rapidly escalating trade war led by the U.S., and a sharp rise in geopolitical risks.

The economy grew 0.6% sequentially in the December quarter, and by 1.3% from a year earlier, the Australian Bureau of Statistics said Wednesday. The economy had clocked an annual growth rate of 0.8% in the prior quarter.

While the economic growth remains well below its historical average pace, it is pulling clear of a slump that saw growth virtually flat-line over the last year. Meanwhile, fresh storms are brewing as the U.S. moves to drive up tariffs on its key trading partners and stoke global uncertainty by halting aid for Ukraine in its war against Russia.

The Reserve Bank of Australia has said it is watching the situation closely, especially in terms of how it affects China, the country’s largest trading partner. However, the RBA’s trajectory for interest rates remains unclear as the central bank is uncertain about how crippled global supply chains and rapidly rising tariffs will affect inflation.

Coupled with the probability of weakened global growth, the central bank remains cautious.

RBA Deputy Gov. Andrew Hauser told a conference earlier Wednesday that even as the global backdrop weakens, the policy-making board of the RBA doesn’t yet see a need for a series of interest rate cuts, adding to the one announced in February.

“Interest rates will go where they need to go to maximize the chances of keeping inflation sustainably in the target band while helping to sustain full employment. Progress towards that target has been good — but it is too soon to declare victory,” Hauser told the AFR Business Summit.

Both public and private spending contributed to the modest recovery in growth in the fourth quarter, supported by a rise in exports of goods and services, the ABS said.

GDP per capita grew 0.1% this quarter following seven consecutive quarters of falls, it added.

Household spending rose 0.4% after a flat result in the September quarter with spending on essentials such as rent and health among the highest contributors to spending growth, the data showed.

Household discretionary spending rose as people made the most of retail sales events and increased spending on hospitality, the ABS said.

Growth in government spending moderated to 0.7% per cent in the quarter following larger rises in previous quarters, the data showed.

Private investment rose 0.3% in the quarter with a focus of new engineering, construction of electricity generation and distribution projects, and mining.

Public investment rose 1.8% amid a boom in state and territory government spending on public transport, roads, water and renewable electricity infrastructure, the ABS said.

Write to James Glynn at james.glynn@wsj.com

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

Australia’s Economy Gathers Momentum as Fresh Storms Brew

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.