Australia's gross domestic product (GDP) growth in the first and second quarters combined points to an economy growing a little below potential, which is consistent with the drift higher in the unemployment rate over 2026 to date, according to a Wednesday note by ANZ Research.

Australia's GDP grew 0.4% in the June quarter on a seasonally adjusted, chain volume basis, after a 0.3% growth in the March quarter. The GDP rose 2.1% compared with a year earlier.

GDP growth was marginally weaker in the quarter but marginally stronger over the year, compared with the bank's own forecasts of 0.5% quarterly growth and 2% annual growth, ANZ said. It expects the Australian central bank will need to see a further easing in annual GDP growth and ongoing weak quarterly growth outcomes to bring demand more into balance with supply.

Public demand registered a second soft quarter in a row, ANZ noted, adding that the ending of electricity subsidies was the main factor behind weak public demand in the first quarter, whereas it was a decline in public investment in the second one. Household consumption grew 0.4% quarter over quarter, the same pace as in the first quarter and down a touch from the 0.5% quarter over quarter average recorded over the second half of 2025.

Business investment fell 0.5% quarter over quarter after a 6.2% quarter over quarter increase in the first quarter and is up a strong 10.5% over the year, reflecting the rollout of data center investment.