Australia economy grows 0.4% in June quarter, boosting rate hike bets

Australia’s economy grew by 0.4% in the June quarter, exceeding economist expectations of 0.3%. Annual GDP growth reached 2.1%, surpassing the Reserve Bank of Australia’s (RBA) projection of 1.9% and its 2% estimate of economic potential.

Treasurer Jim Chalmers described the result as robust despite challenging international circumstances, noting that housing investment and private economy drivers contributed to the growth. Residential investment rose 1.6% for the quarter, while household consumption grew by 0.4%, largely bolstered by a surge in electric and hybrid vehicle sales.

The stronger-than-expected data has increased market expectations for further interest rate hikes by the RBA to combat inflation. Some analysts suggest a rate increase could occur as early as September or November, as current growth levels may not be slowing sufficiently to meet inflation targets.