Various bank economists predicted that the economy would slide back into a per capita recession, defined as two consecutive quarters of negative growth in real GDP per capita, ahead of Wednesday’s Q2 2026 national accounts release from the Australian Bureau of Statistics (ABS).
However, the result was slightly stronger than expected, with Australia’s real GDP expanding by 0.4% in the June quarter, matching population growth.
As a result, real per capita GDP growth was essentially flat in the June quarter, meaning that Australia avoided sliding back into recession following the March quarter’s small decline:
Australia’s real per capita GDP is now tracking 0.3% below its level when the Albanese government took office in June 2022 amid 10 declines over 16 quarters.
Still, Treasurer Jim Chalmers will be relieved as he has avoided headlines of another per capita recession. However, the stronger-than-expected result raises the risk of the Reserve Bank hiking rates.
Poor productivity remains the most pressing problem facing the economy. Labour productivity (GDP per hour worked) recorded zero growth in the June quarter and was down by 0.2% year-on-year and by 5.0% since the March quarter of 2022:
Ultimately, without productivity growth, per capita GDP and living standards cannot grow. It also means that inflation will rise whenever demand increases.
Regrettably, Australia’s economy is caught in a stagflationary trap, overly reliant on immigration and government spending to grow in aggregate, while everyone’s share of the economic pie stagnates.
The situation won’t improve until productivity growth improves. And the suite of policies on offer from our governments – encompassing energy, immigration, and fiscal policy – is largely counterproductive.
