Australia’s Q2 2026 GDP outlook softens but risks stabilise

Australia’s economic growth is likely to remain subdued, with GDP expected to expand by around 0.2 per cent quarter on quarter in Q2 2026. The estimate was largely unchanged from the first projection released on June 26 and remains close to the 0.3 per cent growth recorded in Q1 2026, according to Sydney-based financial corporation Westpac Nowcast.The index suggests that growth has returned to the slow pace seen in late 2024 and early 2025. However, the Westpac Monthly Activity Index showed signs of stabilisation after a sharp decline from November 2025, recording only a modest fall in May and remaining broadly steady in June.

The probability of Australia recording a negative quarter in Q2 2026 is around 30 per cent, slightly higher than the previous estimate of 27 per cent. For Q3 2026, the probability of contraction is estimated at only around 10 per cent, suggesting that the economy could move closer to trend growth.

Australia’s economy appears to be stabilising after a period of weakness, but growth remains below potential.
Westpac’s latest nowcast points to 0.2 per cent GDP growth in Q2 2026, with downside risks easing.
The outlook suggests a gradual recovery, though external shocks, inflation pressures and monetary policy decisions remain key factors shaping business confidence and activity.

The report noted that recent data indicate the economy is absorbing the impact of external shocks and monetary policy tightening without signs of a deeper downturn. Labour market conditions, business activity, consumer spending and confidence indicators remain weak, but the pace of deterioration has moderated.

Westpac Economics said growth could recover towards trend levels, with model estimates suggesting expansion of around 0.6 per cent quarter on quarter in Q3 and Q4 2026. However, it cautioned that uncertainty remains elevated due to risks including the ongoing impact of the Middle East conflict.

Fibre2Fashion News Desk (JP)