Ayan Tripathi
The Australian economy puts up decent gains, but it could shut the door on a Christmas rate cut
Economic growth, which measures the increase in the total value of goods and services produced over time, came in at 0.4% in the September quarter and 2.1% year-on-year, a tad below economists' expectations of 2.2% GDP growth. Harry Murphy Cruise, head of economic research and global trade at Oxford Economics, notes that the slight “miss isn’t a sign of a materially weaker economy”, with growth now at its fastest pace since the third quarter of 2023.
Beneath the overall number, domestic final demand, which represents total spending by households, firms and governments, remained a strong engine, contributing 1.1% to growth. Private demand, comprising household and business spending, was the standout performer, rising 2.9%, the fastest pace since March 2021. This is because of “ongoing expansions of data centres” across New South Wales and Victoria, which drove a 7.6% increase in machinery and equipment investment. Grace Kim, ABS head of national accounts, cites that “firms [are] looking to support growth in artificial intelligence and cloud computing capabilities”.
Additionally, household consumption edged 0.5%; however, roughly 55% of the increase came from spending on essentials like electricity and healthcare, categories which typically account for just 17% of spending. In contrast, discretionary spending fell 0.2%, with many households having brought forward purchases into the June quarter to take advantage of end-of-financial-year discounts. External trade wasn’t much help either, as the declining Balance of Goods and Services reduced economic growth by 0.1% according to the ABS, with imports rising 1.5%, outpacing the 1% lift in exports.
Despite the steady result, Michelle Bullock remains slightly bearish, warning that it’s still unclear how quickly the economy can expand without reigniting inflation. That uncertainty means the August rate cut may well be the last breather households get for a while, with markets expecting the RBA to keep rates steady at its upcoming December 8-9 meeting.
How can this analysis be applied to HSC Economics?
This analysis can be applied to “analyse the causes and effects of economic growth in Australia”, a common short answer and essay question. For this, students need to understand the main drivers of economic growth, like household consumption, business investment, government spending and net exports. Similarly, students need to identify the trends within these individual drivers of economic growth and, by extension, what factors influence these drivers of economic growth.
Australia’s current account slips, but the financial account shines as investors snap up Australian debt
The current account, which records non-reversible and non-refundable transactions between Australia and the rest of the world, nudged deeper into deficit territory at -$16.6m in the September quarter 2025, marking a modest $493m increase from June. Jonathan Koo, ABS head of international statistics, highlights a bright spot: “Australia’s quarterly terms of trade have risen for the first time this calendar year”, ticking up to 95.5, indicating that Australia can buy more imports for a set number of exports. Favourable macroeconomic headwinds led to this trend, as a stronger Australian Dollar dragged down both import and export prices, while higher bulk commodity prices added to this decline in export prices.
Within the current account, the Balance on Goods and Services slipped by $290m, driven mainly by a 1.1% increase in imports. This, however, reflects “Australia’s reliance on overseas supply for diesel and other petroleum products”. Meanwhile, exports rose 0.9% thanks to resilient demand for commodities like iron ore and coal, alongside steady service exports.
Further, Australia’s Net Primary Income deficit narrowed slightly to $18.7b, a $300m improvement. This pick-up was led by a $1.7b jump in primary income credits, reflecting stronger profits on Australian equity investment abroad and solid returns from overseas portfolio holdings. But this was offset by higher income outflows, with foreign investors in Australia reporting stronger profits of their own, corresponding to a $1.4b uptick in primary income debits.
Perhaps the biggest surprise comes from the financial account, where Australia recorded a surplus of $31.2b. This is because of “strong demand by overseas investors for Australian debt and equity”, particularly government bonds, as overseas investors acquired $66.6b worth of Australian-issued debt securities, the strongest demand since the December quarter 2023. As such, global investors appear to be embracing Australia as a “safe haven” investment in an increasingly turbulent environment, as seen by its AAA credit rating.
How can this analysis be applied to HSC Economics?
This analysis can be utilised to analyse the “trends in the size and composition of Australia’s Balance of Payments”, a common short answer and essay question, notably appearing in the 2025 HSC Economics exam. For this, students need to identify the influence of potential domestic and global factors and how they link to changes in the size and composition of Australia’s Balance of Payments. A prerequisite to this is a deep understanding of concepts like exchange rates, the terms of trade, as well as general government policy.
Australia’s housing target is in trouble as thousands of apprentices struggle to finish their programs on the back of low pay and limited training
Recent figures from the National Centre for Vocational Education Research reveal that apprenticeship starts have fallen 20% since 2021, while cancellations and withdrawals have surged 26%. Behind this lie familiar problems: interpersonal issues with employers, inadequate training and poor working conditions and pay. As such, apprenticeship levels are tracking back to 2019 levels, a year when the number of apprentices and trainees hit their lowest point since 1997, according to the McKell Institute.
Build Skills Australia estimates that the construction industry will need to employ another 116,700 trade workers by 2029 to meet government targets, but based on current trends, it’s likely to add just 23,000. Denita Wawn, chief executive of Master Builders Australia, says these chronic labour shortfalls push up “project costs, delay[s] delivery and [lowers] productivity”. This isn’t good news for the Federal Government’s ambition of delivering 1.2m homes over 5 years from mid-2024.
And missing this target would only intensify housing pressures in a market where affordability is already stretched thin, with prices propped up by the First Home Buyer scheme, along with strong investor demand. Consequently, wealth inequality would likely deepen as low-income earners become increasingly priced out of the nation’s most reliable asset class.
However, the outlook isn't entirely bleak. Parts of the industry are actively reframing trades as a pathway of opportunity: offering steady job growth (300,000 job vacancies by 2027), decent wages and AI-proof jobs. The Government, too, has begun to acknowledge the shortcomings of its vocational training system. A recent national review recommended a new employer certification scheme that rewards employers who deliver high-quality training. If implemented well, that could help lift apprenticeship completions, rebuild confidence in the system and chip away at structural unemployment by better aligning the skills workers possess with the skills employers demand.
How can this analysis be applied to HSC Economics?
This analysis can be utilised to evaluate the “impact of microeconomic policies on the Australian economy”, a common short answer and essay question. Here, students can show how recent efforts from the government to encourage the uptake of trade jobs have been offset by deeper structural factors, like the inconsistent training that individual employers provide to apprentices. Also, students need to extend this analysis by explicitly linking it to the impact on Australian stakeholders, including individuals, firms and government, or the impact on economic objectives like the distribution of income and wealth and unemployment.
However, students must understand the specific rationale of microeconomic policies, as labour market policies, for instance, are geared towards lowering structural unemployment or other objectives that are long-term in nature.