National Accounts: Australians’ living standards gain ground
Stronger wages, improving sentiment and rising consumption are driving Australia’s economic recovery, suggesting households are feeling tangible improvements.
National accounts data released today by the Australian Bureau of Statistics (ABS) shows that the Australian economy grew by 0.6% in the June quarter of 2025, in line with Deloitte Access Economics’ forecast but slightly ahead of market expectations. That result brought the annual rate of growth to 1.8%, up from 1.4% over the year to the March quarter, marking the fastest growth since the September quarter of 2023.
Importantly, gross domestic product (GDP) per person rose by 0.2% over the quarter, lifting the pace of per capita economic growth over the year back into positive territory (+0.2%). This signals that Australians are beginning to experience improving living standards after years of challenging economic conditions.
Private demand was the key driver of growth, contributing 0.5 percentage points over the quarter on the back of stronger household consumption (0.4pp). Public demand had no impact on quarterly growth, with government expenditure (contributing 0.2pp) offset by a fall in public investment (-0.2pp). This comes as governments seek to rein in near record levels of spending.
Household spending surged over the quarter, lifting by 0.9% (compared to 0.4% in March) and taking the annual rate (2.0%) to a two-year high. While positive, this was driven in part by increased tourism due to the proximity of the Easter and ANZAC day public holidays in 2025, as well as a statistical rebound from subdued spending in the Cyclone Alfred-affected March quarter.
In related data, the Westpac-Melbourne Institute Consumer Sentiment Index rose by 5.7% to 98.5 in August – a three year high – as the effect of real wage growth, stabilising and moderating inflation and interest rate cuts flowed through to consumers. A continuation of these trends is expected to see consumer sentiment and spending pick up throughout the year.
Shifting labour income dynamics are expected to play a role in this. Today’s data reveals that compensation of employees per hour increased by 4.5% over the year, while wages as a share of total income rose to the highest level in almost a decade. This indicates that a larger share of national income is flowing to households.
The economic outlook will be shaped not only by the consumer recovery, but also by sectoral forces.
Much has been made of the fact that Australia’s post-pandemic growth has been driven by the non-market sector. As the chart shows, this was also true for several years prior to COVID-19. This quarter continued that trend with the Federal Election and several Australian Defence Force exercises boosting activity in public administration. At the same time, growth in the market sector also picked up in the June quarter, which bodes well for future growth.
Today’s release shows a strengthening in the pace of economic growth, and potentially the start of the recovery in consumer spending and the market sector. With the tailwinds of continued real wage growth and anticipated further rate cuts, this momentum is expected to grow through the remainder of 2025 and into 2026.
This newsletter was distributed on 3rd September 2025. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Daniel Kelly, Economist at Deloitte Access Economics.
Click on the links below to read our previous Weekly Economic Briefings:
