The data released by the Australian Bureau of Statistics (ABS) on Wednesday showed that the gross domestic product (GDP) grew by 0.6% in the fourth quarter, which is twice the growth rate of the third quarter. In addition, the annual growth rate reached 1.3%, exceeding the Reserve Bank of Australia's (RBA) previous expectation of 1.1%.

In terms of per capita GDP, there was a slight increase of 0.1% in the fourth quarter, ending seven consecutive quarters of decline. Economists point out that this growth is mainly attributed to a slowdown in population growth, rather than a significant increase in productivity.

The trough of the Australian economic cycle has passed, and there are some signs of recovery. "- Stephen Smith, Partner at Deloitte Access Economics

However, he further pointed out that this recovery only means that the economy is restarting, not a comprehensive recovery. If the government does not take more measures to promote private sector growth and investment, the space for economic improvement is still limited.

The expectation of policy easing has increased, but inflationary pressure still exists

The Reserve Bank of Australia predicts that the economic growth rate will further rebound to 2.4% by the end of 2025. In order to support economic recovery, the RBA cut interest rates for the first time in four years last month, lowering the cash rate to 4.1% and expressing increased confidence in inflation falling back to the target range of 2% -3%.

Nevertheless, monetary policy remains in a state of tightening. Economists generally believe that future policy relaxation may further support economic growth.

However, data also shows that the Australian economy is still below the long-term growth average of nearly 3% in the 20 years before the pandemic, mainly relying on government spending to maintain growth.

Government spending remains the main force supporting the economy. "- Bob Cunnen, Senior Economist at MLC Asset Management

Data shows that government spending increased by 0.7% in the fourth quarter, becoming one of the important supporting factors for economic growth.

Weak productivity growth, RBA policies may be difficult to adjust

Despite the rebound in GDP growth, Australia's productivity performance remains weak and inflationary pressures have not fully eased. Unit labor costs remain high, indicating that wage growth may exacerbate inflationary pressures.

The hourly labor productivity of GDP has declined for three consecutive quarters, indicating that the economic recovery still faces structural challenges. The implied price deflator in the data indicates that inflationary pressure still exists.

These data will not change the RBA's policy stance in the short term. The central bank is more concerned about rising unit labor costs and persistently low productivity. "- Alex Joiner, Chief Economist of IFM Investors

Australian Reserve Bank Governor Michele Bullock also stated after the previous interest rate decision that the slower than expected recovery in consumer spending is one of the important reasons for the slower economic recovery compared to other developed countries.

Although consumption is recovering, the growth rate is still slower than our initial forecast. "- Michele Bullock, Governor of the Reserve Bank of Australia

Despite numerous challenges, the fourth quarter economic data still showed some positive signals. The recovery of household expenditure has become the main driving force for economic growth.

Public and private investments jointly contribute to growth, indicating a rebound in economic activity. Business confidence is stable, and retail sales have achieved growth in five out of the six months from August last year to January this year.

The growth in this quarter was mainly driven by household consumption, while public and private spending also provided support for the growth. "- Katherine Keenan, Head of National Accounts at ABS

Editor's viewpoint: The trend of economic recovery is established, but external risks need to be cautious

This round of economic recovery shows that Australia has emerged from a cyclical trough, but the momentum for recovery is still insufficient. Internal challenges: Inflation pressure remains high, labor costs remain high, and productivity growth is sluggish.

External risk: The escalation of global trade frictions, especially Australia's relationship with major trading partners, may affect future exports. In the short term, with the stabilization of household spending and the easing of monetary policy, the trend of economic recovery will be further consolidated.