Jim Chalmers:
Today’s national accounts show that the Australian economy grew 0.3 per cent in the March quarter to be 2.5 per cent higher through the year. This is very solid in the circumstances. Our economy has got no shortage of challenges, but it’s also got some very sturdy foundations and you can see that in today’s data. This is the equal‑fastest annual growth in almost 3 years. It shows how resilient our economy is at a time of very substantial global economic volatility and instability.
The really big story here is about the private sector and particularly when it comes to business investment. Private sector investment in Australia is booming. You can see that in the numbers we have today. Economic growth was driven by strong growth in business investment, solid consumption and also ongoing growth in dwelling investment. If you look at these numbers, you can see that new public final demand made almost no contribution to quarterly GDP growth. So, all of the growth in the quarter is coming from the private sector and the big driver of that private sector growth is growth in business investment.
Annual growth in Australia is faster than almost every major advanced economy and it is above the OECD average. As I said, the biggest contributor was business investment. We saw the fastest quarterly growth in business investment in nearly a decade and a half. New business investment grew 5.7 per cent in the quarter to be 10.4 per cent higher through the year. It contributed 0.7 percentage points to quarterly growth. Business investment was driven by the biggest through the year rise in machinery and equipment investment in more than 2 decades. Data centre investment was a big part of the story but we’ve also seen business investment supported by the rollout of renewable energy and also battery storage.
The outlook for investment is also really encouraging. If you look at the capex survey data from last week, we see that the level of nominal spending was upgraded both this year and next financial year to around $200 billion in investment in each year. That capex was more than 6 times higher than the median market expectation for the quarter. So, the big story here is business investment.
As a share of the economy, business investment is now at 12.9 per cent. That’s the highest in nearly a decade and it’s much higher than the 11.3 per cent that we inherited. If you make the comparison around new business investment under this government and under the former government, in annualised average terms it’s growing at 5.2 per cent under us. It was going backwards by 1.3 per cent under them. These business investment figures are incredibly welcome. They are also the key reason why private demand grew faster than public demand in the quarter. New private final demand grew 1.3 per cent. It is now 4 per cent higher through the year, contributed 0.9 percentage points to growth in the quarter. This is now the sixth consecutive quarter that new private final demand has contributed more to growth than public demand.
We also saw some continued strength in dwelling investment, which is also welcome. For the first time in 11 years, we’ve had 9 consecutive quarters of growth in dwelling investment. It grew 0.7 per cent in the quarter, 3.5 per cent through the year. When we came to office, it was going backwards by 3.6 per cent. So, an encouraging story when it comes to dwelling investment as well. Household consumption grew half a per cent in the quarter, 2.5 per cent through the year, but impacted by fuel prices and higher interest rates. You’ll also see in the data that not all of the impacts, obviously, of the war in Iran are being captured in these national accounts. It’s the front end of that and we can see that in fuel costs, we can see that in the terms of trade, particularly the impact of the higher dollar, but most of the impact of the war in the Middle East will be captured in subsequent quarters.
If you look at the wages measure, compensation of employees, that was up 1.2 per cent in the quarter, 5.9 per cent through the year. The really important and really encouraging and welcome part of the wages story is that the wages share of income is now 54.2 per cent. That’s up from the 49 per cent that we inherited when we came to office. If you look at the prices measure in the national accounts, that’s come off a bit. Obviously, we’d prefer it to come off than go up, but it’s still too high and we see that in the CPI measure as well, as you all know.
Public final demand made almost no contribution to growth in the quarter as I said, 0.1 per cent growth, 2.5 per cent in the year. This is a very substantial moderation from 0.9 per cent in the previous quarter. We knew from yesterday’s partial data that net exports would be making a fairly sizable detraction, 0.8 percentage points from growth. Exports fell 1.1 per cent. We saw iron ore and coal impacted by weather events and we also saw imports come up, which is partly a function of that much stronger business investment that I talked about at the start. Productivity came off a bit but increased through the year and, obviously, we’re doing much more in the Budget and elsewhere to try and turn that productivity performance around.
The key conclusion here is that the pick‑up in private investment, the private economy more broadly, is a really important strength as we confront a challenging global economic environment. This government and our Budget are very focused on resilience and reform, responding to our substantial economic challenges, global and domestic, but also making the most of our opportunities at a time of volatility and uncertainty in the world.
The last point I would make is this: there will always be people who want to talk the Australian economy down. They do that for their open partisan political purposes, but what we see in these national accounts are some very welcome numbers and a very timely reminder of Australia’s strengths in challenging times.
Happy to take some questions. We’ll start with Matthew, Shane and Jacob.
Journalist:
Just on the productivity measure, so what happens is you’ve seen the hours worked has gone up and the GDP has gone down. So, it’s true, isn’t it, that people are working harder and getting less? And given that the private sector numbers look so good, like, you know, 6 times higher than market expected, 12.9, doesn’t that put so much weight on having to keep those private sector numbers up to maintain even or to try and extract more productivity?
Chalmers:
Despite all the doomsayers and everyone who wants to talk the Australian economy down, we’re seeing a boom in private investment and that’s a good thing. By seeing these investment figures flow through into our economy, that will be an important part of shifting what has been a couple of decades now of poor performance on productivity. If you look at the productivity measures here, as I said in my introduction, they are off a little bit but they are still up through the year and the market sector is a bit higher through the year. We know that the quarterly movements can be volatile. If you look at the fact that GDP growth is a bit weaker than we expected, we’ve got those strong hours worked, as you said in your question, it’s not surprising that the quarterly productivity number fell.
But we didn’t see productivity go backwards for the preceding 5 quarters. In the course of 2025, before this data, we saw some welcome developments on productivity, but we didn’t get carried away because we know that this is a longstanding challenge and it will take some time to shift. The Budget, more than budgets that we’ve seen probably since the 1990s, took the productivity challenge seriously.
Journalist:
Treasurer, the amount of money that’s going into data centres and AI, do you think it’s sustainable at its current level or do you expect it to grow – and do you think that actually put some pressure on those building these centres to be more open to the concerns that are being raised at the community level about these big structures that are coming in fairly close to our major cities?
Chalmers:
Data centre investment is a big part of this business investment story, but it’s not the only part of the story. We’ve seen in recent times some welcome investment in renewable energy and battery storage and in other ways as well. This government has always said that when we see this welcome boom in investment in tech infrastructure, we want to make sure it’s consistent with all our other obligations – whether it be natural resource management, whether it be skills, issues around foreign investment and the like. This investment is overwhelmingly a good thing, but the government’s AI plan and the work that the government is doing is all about making the most of it and making sure that all of this investment serves our national economic interest.
Journalist:
Treasurer, you mentioned household consumption and household disposable income has grown in the quarter. As you said, interest rates detracted from that. The ABS also noted that income tax has increased and income tax detracted from growth in household disposable income. Does that show you didn’t go far enough in your income tax cuts in the past few years?
Chalmers:
A couple of things about that. First of all, the total income tax take is up a bit because people are working more and earning more, and because of our tax cuts they will be keeping more of what they earn as well. This obviously precedes another tax cut which comes in on 1 July and another 2 tax cuts which are in the legislation before the House. Absent those tax cuts, if our political opponents had had their way and we weren’t seeing these tax cuts flowing in our economy, then that tax bill would be higher rather than lower.
Journalist:
Treasurer, economists are warning that the housing slowdown, which is partly due to the tax changes, will be a catalyst for a broader economic slowdown with some saying we could enter a contraction as early as this current quarter. Did you consider the possibility that the tax changes would compound the broader economic challenges?
Chalmers:
First of all, that’s not our expectation. I haven’t seen those forecasts that you’re referring to, but we don’t share that view. Treasury has forecast in the Budget for the economy to continue to grow, obviously subject to developments particularly in the Middle East.
When it comes to developments in the housing market more particularly, I think as you can read in all of the objective analysis of our housing market, auction clearance rates and the like were starting to cool before the Budget – they were about changes in interest rates, they were about broader economic conditions. Now, obviously our tax reform package, which is broad and ambitious and essential, is factored into the forecasts that we have in the Budget and those forecasts have the Australian economy continuing to grow.
Journalist:
Treasurer, Andrew Bragg said this morning that he wants to see house prices go down. Do you think house prices need to go down or need to go up but slower?
Chalmers:
First of all, I think he will say anything that gets his name in the paper. That’s my first point. I don’t think his contributions are typically founded on some kind of objective analysis. That’s the first point.
Secondly, as I’ve said on a couple of occasions now over the course of the last few weeks, we’re not targeting a particular price outcome in percentage terms or in dollar terms. The Treasury analysis that we released with the Budget assumes that house prices continue to grow but a bit more slowly.
Our job and our objective is to make sure that more first home buyers get a fair crack in a difficult housing market, including at auctions. We all know about first home buyers showing up to auctions and competing against subsidised investors who might already have 5 or 10 or 15 properties, and so that’s the challenge that we are addressing with our tax reform package. It is about making sure there are more affordable options for more people to get a toehold in what has been a really difficult market. We’re not targeting a particular price or percentage outcome.
Journalist:
Thanks, Treasurer. Back to the national accounts and the business investment you were talking about, at the risk of being a doomsayer, when the capex numbers came out last week, Westpac pointed out without data centres business investment would otherwise have been negative or flat. Is it not the case that this boom is masking a wider malaise in business investment, that without it we could have been in an investment recession for businesses?
Chalmers:
No, we’ve seen some welcome investment in areas like renewable energy and battery storage.
Journalist:
That’s government funded.
Chalmers:
If your question is without this big chunk of business investment, would business investment be worse, then of course, the answer to that is yes. What we’ve seen for some time now, under the life of this government, contrary to what you often read, is that business investment has been strong under this government. Look at the average over the full 4 years. We’ve had business investment growing quite strongly. The average annualised growth in business investment is multiples of what we saw under our predecessors and that’s because our predecessors had, on average, business investment going backwards. That’s not just a story about data centres. Data centres are a big part of the story today, but not the only part of the story of very strong business investment in our economy.
Journalist:
Thanks, Treasurer. You talk about the economic growth being resilient, but haven’t we seen a sharp slowdown in the economy from the December quarter to the March quarter and isn’t that the start of more weakness ahead? Are we, in fact, entering a much weaker period of growth now and this March quarter confirms that?
Chalmers:
This growth is really solid in the circumstances. You think of everything that’s coming at the Australian economy, the fact that we’ve got the equal fastest through the year growth for some time – 3 years – the fact that we’ve got any growth at all, given the challenging global circumstances, I think is welcome. We have seen a moderation in growth from December to March. December was especially strong and in March we’ve got this outcome that we’re talking about today.
I think your broader question is a really important one because, obviously, when you remember that this data doesn’t capture the worst parts or the worst consequences of the war in the Middle East, then obviously we can expect some challenging times ahead. We’ve made that clear on a number of occasions. We made it clear in the Budget that even the very serious global assumptions that feed our forecasts, they could become even more severe. We’ve made that clear, we’ve been very upfront about that.
But let’s not forget that going into this period of heightened global economic uncertainty, we’ve got these very sturdy foundations, and I think that’s overwhelmingly the story of what we’re seeing today.
Journalist:
Just on a slightly different issue, Treasurer, given the news out of America of the changes regarding submarines, vis‑a‑vis the AUKUS deal, aren’t the Americans just treating your government and by extension Australian taxpayers as mugs? And doesn’t Ed Husic have a point when he says if the goalposts change, you should be having a broader argument about whether this is in Australia’s interests or not?
Chalmers:
Well, the answer to the first part of the question is no, I don’t believe that they are. When it comes to Ed’s comments, Ed has a right to put his view whether it’s in the party room or outside the party room. I think the AUKUS deal is in Australia’s national interest and that’s the government’s position.
Journalist:
Treasurer, the GDP per capita was negative and the household savings to income ratio fell. We’re not in a recession, but do you acknowledge that it kind of feels like it for Australians?
Chalmers:
I acknowledge that Australians are under pressure, even though these numbers in the economy in aggregate are solid in the circumstances. We’ve made it clear, whether it’s in and around the Budget, before that or after that, we understand that people are under pressure. Whether it’s in the housing market or whether it comes to these price pressures which have been turbocharged by a war on the other side of the world. From an economic point of view the end of the war in the Middle East can’t come soon enough and that’s because it’s piling on the pressure on Australians who are already doing it tough.
When it comes to the per capita number, it’s growing through the year. It’s volatile from quarter to quarter. It’s not unusual for it to go backwards in a quarter. I think on average every fourth quarter it goes backwards. It went backwards on a number of occasions under our predecessors. But your broader question Chloe, about whether Australians are feeling under pressure, we know that they are. That’s why we’ve got tax cuts coming. That’s why we’ve cut taxes a number of times already. It’s why we welcome the decision from the Fair Work Commission.
This week and this government are all about higher wages and lower taxes for workers and a fair go for first home buyers, and that’s because we don’t just recognise the pressure that people are under, we’re responding to it.
Journalist:
The Defence Minister has said the changes in the types of submarines Australia is getting will be cheaper. As the Treasurer, can you put a figure on that and, if not, could you at least tell us is it hundreds of millions or billions that will be saved?
Chalmers:
Obviously, I have the same view as the Defence Minister. This will make the investment a bit cheaper, but we don’t update that from week to week. We do that from Budget to Budget and you can expect us to do that at the next opportunity.
Journalist:
Treasurer, the household spending growth was driven in part by the energy rebates coming off. Do you think households are spending too much on electricity?
Chalmers:
What we’ve seen in recent weeks is a very welcome development when it comes to electricity. The default market offer that Minister Bowen and the regulator have been talking about shows electricity prices coming off quite substantially. Obviously, that’s a very welcome development. It means that our investments in renewable energy in particular are paying off.
The energy rebates that we had in the system were about recognising that there are responsible ways to help people with cost‑of‑living pressures. Those energy rebates have ended now. They are playing out in these figures as you rightly identified in your question, but we are providing cost‑of‑living help in other ways. We’ve got the fuel tax cut at the moment. We’ve got income tax cuts coming in on 1 July and 2 subsequent to that in the legislation before the House.
Journalist:
Treasurer, there were suggestions today to see the social media ban extend to large language AI models. As a father, would you be for that and as a Treasurer who’s acknowledged the need for more productivity and the importance of AI for productivity, could that have a negative effect, doing something like that and not introducing kids to these models at an early age?
Chalmers:
I haven’t seen that story, Charles, I apologise for not seeing that story. No doubt, colleagues will come to a view on that. My personal point of view is in order for the Australian economy to realise the full benefits of AI we need to care deeply about the possible downsides, whether it’s the downsides for our kids, whether it’s the downsides in the labour market, the downsides for creators. What this government has always sought to do is strike a really effective balance, capturing the upsides of AI, minimising the downside risks, and that includes the impact on our young people.
Journalist:
Treasurer, I understand that we’ve known for some weeks that this change in the AUKUS arrangements was coming from the US. The Budget was only 3 weeks ago. Why was that change in costs not incorporated even in the decisions taken but not yet announced, and how come taxpayers will have to wait until December to find out what the difference is?
Chalmers:
The standard way to account for changes in Defence spending is from Budget update to Budget update. That’s the standard that we will be adhering to.
Thanks very much.