Digital Finance Analytics (DFA) Blog · Martin North

Stronger Growth In the Rear View Mirror, Yes, But…

·14 min·1 clip

Martin North reveals why Australia's strong GDP growth might force the RBA to raise interest rates sooner.

Martin North of Digital Finance Analytics analyzes Australia's recent strong GDP figures and their implications for monetary policy. He argues the reported economic growth increases the likelihood of near-term interest rate hikes from the Reserve Bank. This episode dissects the December 2025 national accounts data to reveal underlying economic pressures. The ABS reported GDP rose 0.8% for the quarter and 2.6% annually, the strongest annual pace in three years. Public and private demand each contributed 0.3 percentage points to the quarterly growth figure. Government spending was a primary driver, with public demand up 0.9%, outpacing private demand. Analyst Tarek Brooker noted on X that the growth of the working-age population has reversed and is now slightly below mid-2024 levels. Household spending rose only 0.3% in the quarter, with spending on essential goods actually falling by 0.5%. Expenditure on electricity, gas, and fuels fell 9.5%, influenced by government rebates and decreased usage. Mining production increased 2.6%, adding 0.3 percentage points to GDP, while agricultural production rose 2.5%. Corporate profits surged, with mining profits up 5.7% and total corporate profits rising 2.2%, their highest quarterly increase since early 2023. Private investment grew a modest 0.7%, contributing just 0.1 percentage points to GDP growth. The household savings ratio increased to 6.9%, its highest level since late 2022, as disposable income growth outpaced spending. Treasurer Jim Chalmers framed the strong growth as a robust foundation to confront global volatility, including Middle East hostilities. North contends the data shows government spending has a disproportionately high impact, given the public sector is only one-third the size of the total economy. He highlights that labour productivity showed zero improvement in the quarter, a point echoed by AMP's Shane Oliver, who notes long-term productivity stagnation. The OECD is cited reporting that competition has waned, market concentration has risen, and fiscal policy should focus on reducing the deficit. Economist Warren Hogan observed on X that federal government consumption remains at a record high of about 11.25% of GDP, far above the historical average of 7.5%. RBA Governor Michele Bullock emphasized the March board meeting is "live," suggesting a rate increase is definitely on the cards. Bullock stated the board would consider moving more quickly, with inflation at 3.8% and the labour market tight. She warned the unemployment rate may need to rise and noted a Middle East energy shock could be harder to manage with already elevated inflation. North concludes that high government spending and taxes, coupled with stagnant productivity, create inflationary pressure. The tone is analytical and critical, dissecting official data with a skeptical eye toward government messaging. The style is a direct-to-camera monologue, educational yet opinionated, focusing on economic indicators and policy implications. Listeners interested in a detailed, critical breakdown of Australian economic data and monetary policy will find this episode valuable. Those seeking a purely optimistic or government-aligned perspective on the economy might choose to skip it.

Listen to the show on

Apple Podcasts Spotify

Play clips from this episode More from Digital Finance Analytics (DFA) Blog