Today's National Accounts show strong, broad‑based growth and an ongoing recovery in the private sector.
These really encouraging numbers are a very robust foundation from which we confront intense global economic volatility, made worse by the dramatic escalation of hostilities in Iran and across the Middle East.
Growth in our economy is now much stronger and broader, and that's very welcome.
The defining story of the Australian economy in 2025 was the pick‑up in private sector activity, which these figures confirm.
It's encouraging to see more growth in business investment, dwelling investment, market sector productivity and household consumption, even though household consumption was weaker than expected.
The Australian economy grew 0.8 per cent in the December quarter, to be 2.6 per cent higher through the year.
This is the strongest pace of annual growth in almost three years.
Today's figures confirm the Australian economy outperformed in 2025, with faster growth than every major advanced economy.
This is in addition to Australia's record of stronger jobs growth and higher labour force participation than any major advanced economy, since we came to office.
Australians should be proud of these numbers.
We have serious challenges but big advantages too.
Australia is not immune from extreme global volatility, but our unique combination of economic strengths means we are well placed to manage the challenges coming at us.
The pace of annual growth in private demand picked up in 2025.
Private demand grew faster and contributed over three times more to economic growth than public demand in annual terms.
Within a year, annual private demand growth more than tripled but annual public demand growth more than halved.
Real GDP per capita increased by 0.4 per cent in the quarter to be up 0.9 per cent over the year, the strongest in more than three years.
While we know quarterly movements can be volatile and the job is far from over, productivity is up over the past year.
Productivity was flat in the quarter but 1.0 per cent higher in annual terms, above the 20 year average. In the market sector productivity was stronger, growing by 1.5 per cent over the year.
This contributed to nominal unit labour costs growth moderating to its slowest rate in nearly five years, growing by 3.3 per cent in annual terms.
New private final demand grew by 0.4 per cent to be 3.2 per cent higher through the year.
There were contributions from all three components of private demand in the quarter, household consumption, dwelling investment and business investment.
While household consumption at 0.3 per cent was weaker than expected in the quarter, it was still up 2.4 per cent through the year.
Growth in household consumption reflects rising real incomes.
Real disposable incomes per capita rose 0.6 per cent in the quarter to be 2.0 per cent higher through the year. When we came to office, they were going backwards by 1.5 per cent in the quarter.
This comes after the latest OECD data shows that annual per capita incomes in Australia are growing at more than twice the average of major advanced economies.
A solid pick up in compensation of employees was the key driver of real income growth.
Compensation of employees grew 1.4 per cent in the quarter to be 6.4 per cent through the year. Since we have come to office average annualised compensation of employees growth has been 7.3 per cent, compared to 4.6 per cent under our predecessors.
Growth in real incomes was also supported by more moderate price growth in the National Accounts measure. The consumption deflator grew 0.8 per cent in the quarter to be 3.1 per cent through the year. This is down from 1.0 per cent quarterly growth and 3.2 per cent annual growth in the previous quarter.
For the first time in a decade, dwelling investment has now grown for eight consecutive quarters.
Dwelling investment rose 0.6 per cent in the quarter, to be 5.5 per cent higher through the year. This is a substantial turnaround from what we inherited, with annual dwelling investment going backwards by 3.6 per cent when the Government was elected.
Building more homes and getting more Australians into their own home is a key priority for the Government and it's pleasing to see more progress in today's data.
After recording the fastest pace of growth in almost five years last quarter, business investment grew once again. New business investment rose 0.5 per cent in the quarter, to be 4.4 per cent higher through the year.
Activity in this quarter was supported by building and structure investment, particularly in data centre projects.
This strength has seen business investment as a share of GDP lift to 12.3 per cent, up from 11.3 per cent when we came to office.
The outlook for business investment is improving, with data last week showing capital expenditure intentions for 2025-26 have been revised up to around $200 billion.
New public final demand grew by 2.4 per cent in annual terms, lower than private final demand and GDP. While quarterly growth was 0.9 per cent, a key driver was a 3.3 per cent lift in defence spending in the quarter.
Around half of the quarterly rise in defence spending was on recruitment of staff, and half was investments such as naval programs, land combat vehicle manufacturing and imports of defence weapons platforms.
Net exports detracted 0.1 of a percentage point from quarterly growth, reflecting imports primarily associated with consumption.
Inventories contributed 0.4 of a percentage point to quarterly growth, with a build up in mining and non‑monetary gold inventories driving this strength.
Stronger and broader growth, the private sector recovery and lift in market sector productivity are all encouraging features of today's data, particularly at a time of heightened global uncertainty.
Under Labor, economic growth is picking up, business investment is strengthening, more than 1.2 million jobs have been created, unemployment is low, and participation is at near record highs, but we know there are big challenges too.
We are taking a responsible approach to the budget while providing cost of living relief, including another tax cut this year and next year, student debt relief, cheaper medicines and more bulk billing.
The upcoming Budget will have the right focus on addressing inflation, boosting productivity and managing global economic uncertainty and today's numbers are an important reminder that we face these challenges and these uncertainties from a position of genuine strength.
