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