Australian households spent a little more in the June quarter, saved a little more, and finished it no better off per person. The Australian Bureau of Statistics said on Wednesday the economy grew 0.4 per cent in the quarter and 2.1 per cent through the year. GDP per capita was flat.

Both headline numbers came in above what economists had expected, which was 0.3 per cent for the quarter and 1.8 per cent through the year. Within an hour, traders had lifted the implied chance of a rate rise at the Reserve Bank's 29 September meeting from about 50 per cent to about 70 per cent. A November increase was fully priced.

The cash rate is 4.35 per cent. The Monetary Policy Board held it there on 11 August after three increases earlier this year, and said it would raise again if upside risks materialised. Trimmed mean annual inflation was 3.6 per cent at that meeting, above the 2 to 3 per cent target band, and the monthly consumer price indicator was 3.5 per cent in the year to July.

Household consumption rose 0.4 per cent and added 0.2 percentage points to growth. Discretionary spending led it, up 1.4 per cent, and most of that was vehicles. Electric and hybrid sales reached a record. At the same time the household saving ratio rose to 6.5 per cent from 6.4 per cent, which is what people do when they are not confident about the next twelve months.

“Economic growth remained subdued in the June quarter as households continued to behave cautiously," said Grace Kim, the ABS head of national accounts. She noted that the number of Australians travelling overseas for the northern hemisphere summer fell for the first time since the pandemic.”

Dwelling investment rose 1.6 per cent in the quarter and 5.8 per cent over the year. Private investment overall was flat, with machinery and equipment going backwards. Public demand added 0.1 percentage points. The terms of trade fell 1.6 per cent.

Compensation of employees rose 1.5 per cent, split between 1.4 per cent in the private sector and 1.8 per cent in the public sector. Set that against the wage price index, which grew 3.2 per cent through the June quarter while the monthly inflation indicator was running at 3.5 per cent. Wages are not keeping pace with prices, and unemployment rose to 4.5 per cent in July.

For the 2025-26 financial year the economy grew 2.4 per cent, faster than either of the two years before it, with service industries doing most of the work. Treasurer Jim Chalmers said annual growth in Australia "was as strong or stronger than every major advanced economy".

Economists disagreed about what the Reserve Bank will make of it. Alex Joiner, chief economist at IFM Investors, said the economy "risks not slowing quickly enough for the RBA to achieve its inflation objectives". Marcel Thieliant of Capital Economics was more cautious. "A rate hike isn't a done deal yet," he said. "After all, the labour market is now clearly loosening."

The arithmetic that matters to a mortgage holder is simpler than the debate. Output per person did not move in the quarter. Real wages went backwards. If the Board reads the same numbers as the market did on Wednesday, the households whose caution kept growth subdued will be the ones who pay for the fact that it grew anyway. The next reading that will shape that decision is the August labour force release, due before the Board meets on 29 September.