The Australian economy grew by 0.2 per cent in the March quarter, dampened by extreme weather events, soft consumer demand and waning public spending.

Australia’s GDP grew by a sluggish 0.2 per cent in the March quarter, a notable slowdown compared to the December quarter growth of 0.6 per cent, ABS data showed.

According to Katherine Keenan, ABS head of national accounts, extreme weather and a slowdown in government spending were the biggest culprits dragging down GDP growth in March 2025.

“Economic growth was soft in the March quarter. Public spending recorded the largest detraction from growth since the September quarter 2017,” she said.

“Extreme weather events reduced domestic final demand and exports. Weather impacts were particularly evident in mining, tourism and shipping.”

Treasurer Jim Chalmers directly linked the soggy March GDP reading to the extreme weather events that had occurred throughout the first quarter of 2025, including ex-tropical cyclone Alfred and east coast flooding.

“The human impacts matter to us most, but the economic cost is very significant too, and we’ll see that in Wednesday’s national accounts,” he said earlier this week.

Natural disasters have cost Australia over $2.2 billion in lost economic activity in 2025 so far, federal treasury analysis has indicated.

The Reserve Bank forecast GDP growth to be 1.8 per cent in the 12 months to June. However, with economic growth only up 1.3 per cent in the year to March, growth appears off-track to meet RBA forecasts.

The March GDP reading also undercut Commonwealth Bank economists’ forecasts, who predicted that the economy would grow by 0.3 per cent in the first quarter of 2025, and 1.5 per cent in the 12 months to March.

RSM Australia economist Devika Shivadekar said that the layered threats to Australia’s economy, alongside the weak March GDP reading, could prompt further interest rate cuts from the RBA.

“These headline figures reinforce expectations that the Reserve Bank of Australia will remain cautious, with its latest commentary pointing to a slower-than-expected recovery in domestic activity over 2025,” she said.

“Ongoing global uncertainty, muted household spending, and the aftershocks of recent climate-related disruptions all contribute to a more dovish near-term stance.”

Australia’s dismal economic growth per person – GDP per capita has declined in nine of the past 11 quarters – has been bad news for Australian living standards, AMP economist Diana Mousina said.

GDP per capita fell by 0.2 per cent in the March quarter, after a 0.1 per cent rise in the December 2024 quarter broke Australia’s longest-running per capita recession on record.

Household consumption, which grew by 0.4 per cent in the March quarter, was underpinned by rising costs for essential goods, Mousina added. Electricity prices grew as government rebates unwound, and weather disruptions put upwards pressure on food prices.

Despite the challenges Australia’s economy has faced, Mousina said that household consumption had shown some signs of recovering. Factors such as interest rate cuts and a real wage boost for minimum wage workers would boost economic growth in the coming quarters, she added.

“Household consumption is slowly improving after very poor growth in late 2023 and into 2024, and the outlook is better because of the relief from interest rates, real wage increases and tax cuts,” she said.

“On our estimates, the average household is better off by $108 a week (compared to a year ago) from these impacts.”