Australia's GDP expanded 0.5 percent on the quarter in the three months to December, down slightly from the 0.6 percent increase in the three months to September and below the consensus forecast for an increase of 0.7 percent. GDP rose 2.7 percent on the year, down from 5.9 percent previously and just below the consensus forecast of 2.8 percent.

Consumer spending slowed in the three months to December, increasing 0.3 percent on the quarter after advancing 1.1 percent in the three months to September. Private investment fell for the third consecutive quarter and at a more pronounced rate, down 1.7 percent after dropping 0.2 percent previously, reflecting weaker spending on both construction and machinery and equipment. This was offset by a stronger growth in exports, with net trade making a positive contribution to headline GDP growth of 1.1 percentage points after making a negative contribution of 0.2 percentage points in the three months to September.

Today's data cover the period in which officials at the Reserve Bank of Australia continued to raise policy rates aggressively in response to strong inflation pressures, with this policy tightening extended at the RBA's most recent policy meeting early February. Officials at that meeting noted that the Australian economy grew strongly over 2022 but expect growth to moderate to around 1.5 percent over 2023 and 2024. They also warned that there is uncertainty around the outlook for the global economy and the timing and extent of the expected slowdown in household spending. Despite these concerns about the growth outlook, the RBA appears likely to tighten policy further in upcoming meetings, including at their next meeting next week.

Fourth-quarter GDP is expected to rise a quarterly 0.7 percent for year-over-year expansion of 2.8 percent.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy and is usually released early in the third month after the reference period.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. These data, which follow the international classification system (SNA93), are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower.