Australia's GDP expanded 0.6 percent on the quarter in the three months to December, up from the 0.3 growth recorded in the three months to September and just above the consensus forecast of 0.5 percent. The economy has grown at a weak pace for two years, reflecting the impact of tight monetary policy settings. GDP rose 1.3 percent on the year in the three months to December, picking up from 0.8 percent in the three months to September and in line with the consensus forecast.

Household spending and private investment both rose modestly on the quarter, up 0.4 percent and 0.3 percent respectively, while net trade and government spending also made positive contributions to GDP growth. GDP per capita grew 0.1 percent on the quarter after seven consecutive quarters of declines.

Today's data cover the period in which officials at the Reserve Bank of Australia continued to leave policy rates on hold. At their latest meeting, held last month, officials cut policy rates for the first time since 2020 but indicated that further policy easing remains dependent on the inflation outlook. Today's data, however, suggest that previous policy tightening is continuing to weigh on demand and activity.

Forecasters think the economy picked up at year end and expect a 0.5 percent rise on the quarter and 1.3 percent growth on year compared with 0.3 percent and 0.8 percent in Q3.

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.