The Australian Bureau of Statistics (ABS) reported that GDP in the second quarter of 2026 expanded 2.1% year-on-year, higher than the 1.8% forecast by analysts, supported by private demand and exports of mineral goods. On a quarterly basis, GDP grew 0.4%, also above the expected 0.3%. Household spending remained sluggish, rising only 0.4% due to higher energy prices stemming from the conflict in the Middle East. The strong figures pave the way for the Reserve Bank of Australia (RBA) to continue tightening monetary policy, with July inflation at 3.5%, above expectations. The RBA expects inflation to slow to its 2-3% target range by late 2027.
Strong GDP growth and above-target inflation increase likelihood of RBA rate hikes, pushing bond yields up.
