DEFENCE ARMS GDP GROWTH; CANADA LINK-UP
Defence spending up as economy grows 2.6 per cent in 2025
Higher Defence spending helped Australia’s economy grow by 2.6 per cent over 2025 and by 0.8 per cent in the December quarter, according to the latest official statistics. Gross domestic product (GDP) figures issued by the Australian Bureau of Statistics showed a rise in both private and public consumption and investment. While export prices rose (especially in rural goods), net trade was in the red, as imports outstripped exports. Government consumption grew by 0.9 per cent in the quarter - and by 3.3 per cent during the year - assisted by a 2.1 per cent quarterly rise in defence spending, including through stronger defence recruitment. Defence investment rose by 7.1 per cent in the quarter, with higher spending on naval programs, land combat vehicle manufacturing, and importation of defence weapon platforms.
Australia, Canada step up links in defence, AI and trade
Australia and Canada have agreed on a comprehensive set of measures to increase bilateral co-operation in defence, technology, critical minerals, clean energy, and food security. A joint statement issued by visiting Canadian Prime Minister Mark Carney and PM Anthony Albanese pledged to advance greater collaboration in countering emerging threats, such as foreign information manipulation and other forms of foreign interference. The two leaders also committed to a new memorandum of understanding for greater engagement on artificial intelligence, and to stronger collaboration on the development of critical minerals. In addition, the two nations agreed to step up engagement on their respective superannuation and pension funds, as well as to promote cooperation between regulators on agriculture and food security.
RBA Head’s inflation warning on Middle East conflict
Reserve Bank of Australia Head Michele Bullock has issued a bearish outlook on the effect of conflict in the Middle East on inflation and inflationary expectations. In an address to a business forum, the RBA Governor said a supply shock could add to inflation pressures, while global developments could be significant drivers of outcomes in small open economies like Australia. Ms Bullock said that shocks to global demand could result from slower economic growth in Australia’s key trading partners. Alternatively, a prolonged impact on energy markets could have adverse effects on global economic activity, resulting in downward pressure on inflation. The RBA Governor’s warning comes as Australia’s surplus in international trade in goods continued its long-term downward trend in January, falling by $742 million seasonally adjusted, or around 22 per cent over the month. ABS figures show that the value of the export of goods fell by almost one per cent over the month, while imports rose by 0.8 per cent.
Lower investment, falling technology gains hurting productivity, says PC
Labour productivity growth in Australia over the period between 2015 and 2024 was the lowest in almost 60 years, according to the Federal government agency, the Productivity Commission (PC). In a submission to a Senate Select Committee, the PC claims that productivity growth was 0.4 per cent over the period, or one-third of growth over the previous 10-year span – with negative implications for incomes and living standards. The PC attributed the productivity slowdown to the rise of the non-market (government-funded) services sector and smaller gains from technology and its diffusion. It also cited stalling business investment, declining labour mobility, and a lack of appetite for economic policy reform. The submission cited labour productivity growth rates of 2.4 per cent between 1965 and 1975, and of 2.2 per cent between 1995 and 2005.
Parliament raises scrutiny of Defence portfolios
Federal Parliament will have greater oversight over Australian defence matters, following the passage of legislation last week. A Parliamentary Joint Committee on Defence will be established to receive and consider classified information to conduct scrutiny of Defence and its portfolio agencies. Deputy Prime Minister Richard Marles said the enabling legislation would establish appropriate safeguards that enhanced Parliamentary accountability and transparency, while ensuring that sensitive information was protected. The proposed committee of 13 will comprise seven government and six non-government members across both Houses of Parliament.
Farrer by-election called for May 9
Voters in the southern New South Wales seat of Farrer will go to the polls on May 9, in a by-election to replace former Liberal Leader Sussan Ley. Ms Ley held the Albury-based seat from 2001, when she replaced retiring MP (of 17 years) and former Nationals Leader Tim Fischer. At the May 2025 Federal election, she staved off a challenge from an Independent candidate. The electorate of Farrer stretches from east of Albury to the South Australian border, and includes the towns of Griffith, Deniliquin and Narrandera.