GDP still dependent on taxpayers
In the June quarter of 2025, Australia’s real GDP growth rate was 1.8% p.a., driven by a pickup in private sector activity.
However, the public spending, investment, and employment data indicate that government-supported sectors are still outperforming private industry.
Heavy reliance on taxpayer funding raises concerns about budget sustainability, especially as tax revenues ease from last year’s peak while government spending continues to grow.
Flat investment signals fragile output
Total investment across the economy grew by just 0.2% over the past year, with private sector reinvestment falling to 8.1% - well below historical highs.
Investment patterns have shifted: building investment remained steady, while spending on machinery and equipment declined.
This continued weakness in investment raises concerns about the strength and durability of a private sector-led recovery. As a forward-looking indicator, subdued investment suggests softer future output and productivity.
Wages outpace profits
In the June quarter of 2025, private sector wages rose by 5.8% p.a., while business profits increased by only 0.8% p.a. (nominal terms).
Many industries are facing subdued profit growth and elevated wage costs, reflecting the combination of a constrained labour market and weakening business conditions.
The data indicates that challenging conditions in the private sector are continuing.
Australia’s business R&D stagnates
Australia’s R&D intensity remains low at 0.9% of GDP, a level unchanged since the early 2000s, even as business R&D spending reached $24.4 billion in 2023 - 24.
In today’s rapidly evolving tech landscape, this stagnation points to a deeper problem. The decline in R&D intensity during the mid-2010s and its failure to rebound highlight ongoing difficulties in translating research into commercial success.
Business R&D plays a critical role in driving innovation and productivity because it’s closest to market application. The drop suggests a more challenging environment for converting research into market-ready solutions, ultimately dragging on productivity growth.
Housing work remains flat
Residential building activity was flat in Q2 2025 at $24.2 billion, still 5% below its 2018 peak (ABS).
While engineering construction has surged since the pandemic, residential building has seen only modest gains despite strong demand.
The government’s decision to pause further changes to the National Construction Code until the Housing Accord concludes, alongside with expedited development approvals, is expected to influence activity through the rest of the year.
However, housing construction growth continues to be constrained by limited capacity and rising costs.
Count of Aussie businesses
As of 30 June 2025, there were 2,729,648 operating businesses in Australia, an increase of 2.5% over the 2024–25 financial year.
The agriculture, forestry and fishing sector saw the largest net decline, with business numbers falling by 0.8% to 170,890.
In contrast, the transport, postal and warehousing sector grew by 5.1%, reaching a total of 249,289 businesses.
