ASX 200 up 0.9% as Q1 GDP Growth of 0.2% Boosts July Rate Cut Bets

Key Moments:

Economic Slower Than Expected

According to data from the Australian Bureau of Statistics released on Wednesday, Australia’s economy expanded by 0.2% in the first quarter of 2025. This marks a decline from the 0.6% reported during the previous quarter, and the figure fell short of the projected 0.4%. On an annual basis, GDP growth remained unchained from Q4 2024’s 1.3%. Just like the quarter-on-quarter performance, however, the jump did not meet expectations as analysts had forecast a 1.5% jump.

In nominal terms, the GDP advanced by 1.4%, while the terms of trade edged higher by 0.1%. Australian households also demonstrated a shift in saving habits, with the saving-to-income ratio climbing to 5.2% from the previous 3.9%.

Markets React Positively to Potential for Rates Being Slashed

The economic data fueled speculation that the Reserve Bank of Australia may act to ease monetary policy further. Interest rate swaps now imply an 82% probability of a policy rate decrease in July, 0.5% higher than the prior rate. As a result, local equities advanced, which culminated in the S&P/ASX 200 index closing with gains of 0.9% to 8,541.8 on Wednesday.

In addition, financial stocks (ASX: XFJ) advanced 1%, supported by expectations of increased loan demand in a lower-rate environment. Among them, the Commonwealth Bank of Australia gained 1.38%. As per LSEG data, this allowed the CBA to become the first stock on the ASX to exceed a market capitalization of A$300 billion.

It should be noted AMP’s chief economist and head of investment strategy, Shane Oliver, cautioned that financial entities faced significant downside risks. He explained that if economic conditions deteriorated further, that could lead to a rise in loan defaults, late payments, or “bad debts.”

A climb was also achieved by consumer discretionary shares, which advanced by over 1%. JB Hi-Fi was a top performer as its stock rose around 2%. Meanwhile, shares of Lynas jumped by more than 3.2% on a warning of production delays that may result from China’s dominant role in the critical minerals supply chain. Financial services company ZIP Co Limited stood at the top of the ASX 200 by rallying 13.62%. Brickworks Limited, on the other hand, sank to the bottom due to a slump of 4.41%.