Economists and policymakers are closely watching how consumers are responding to rising interest rates. (ABC Melbourne: Kristian Silva)
The economy grew 2.1 per cent over the year to June 30, according to the latest data. Treasurer Jim Chalmers says it's proof the Australian economy is as strong or stronger than every other major advanced economy.
Australia's economy grew 0.4 per cent in the June quarter, slightly beating most economist forecasts and further raising the prospect of an interest rate hike as soon as this month.
The economy grew 2.1 per cent over the past year to June 30, seasonally adjusted, according to the latest Australian Bureau of Statistics National Accounts.
Both numbers were slightly ahead of economist forecasts, which had centred on a quarterly rise of 0.3 per cent and annual economic growth of 1.8 per cent.
Treasurer Jim Chalmers said the numbers provided further evidence of Australia's relative economic outperformance in challenging global circumstances.
"Annual growth in Australia was as strong or stronger than every major advanced economy – equal to the United States and much stronger than the rest," he said in a press release soon after the data came out.
However, IFM Investors chief economist Alex Joiner said the National Accounts highlighted the unsustainability of the growth given current economic conditions.
"Productivity remains poor, per capita GDP was flat [and has lagged other advanced economies materially] and unit labour cost growth elevated," Dr Joiner said.
Traders have subsequently pushed up the odds of a September rate hike by the Reserve Bank of Australia to about 70 per cent, according to Bloomberg analysis of futures market pricing.
The odds of a rate hike at the RBA meeting on September 28-29 were sitting about 50 per cent ahead of today's data.
The yield of the Australian government's 10-year bond has climbed to a 15-year high, in a worrying sign for Australian borrowers.
A rate hike by November is fully priced in, with traders betting on a 20 per cent chance of hikes in both September and November.
Market pricing suggests the RBA's cash rate will peak at 4.8 per cent by the middle of next year, almost two rate rises higher than the current level of 4.35 per cent.
Indeed Asia-Pacific economist Callam Pickering said Australia's labour productivity, defined as real GDP per hour worked, was unchanged in the June quarter, 0.2 per cent lower than a year ago, and 5 per cent below its peak.
