The AUD/USD pair slid 1.1% to $0.6411 by 22:30 ET (03:30 GMT).
Third-quarter GDP grew 0.8% year-on-year, missing expectations of 1.1% and slowing from the 1% seen in the prior quarter.
Quarter-on-quarter growth picked up to 0.3% but missed expectations of 0.5%, while also falling below the RBA’s 0.5% forecast.
The softer reading was driven chiefly by weak private spending, as sticky inflation and high mortgage rates eroded consumer appetite. Soft commodity export prices also weighed as overseas demand, especially in China, remained weak.
The reading sparked speculation that the RBA will be forced into easing policy sooner rather than later, especially as GDP missed its forecasts.
“The release of another quarter of tepid AU GDP has resulted in the Australian interest rate market pulling forward a first 25bp RBA rate cut into April from May,” Tony Sycamore, Market Analyst at IG wrote in a social media post.
The GDP data undermines recent signaling from RBA members that the central bank will keep interest rates high for longer, especially amid recent signs of sticky underlying inflation.
Consumer inflation data for October showed underlying inflation still remained comfortably above the RBA’s 2% to 3% target range, with the bank only forecasting inflation to sustainably fall within its target by 2026.
While the central bank has stated that cooling inflation is its top priority, softening economic conditions in the country may spur early rate cuts.
ANZ and Westpac both expect the RBA to begin cutting rates by May 2025 in a mild easing cycle.
Capital Economics said in a Wednesday note that the bank will “start a short easing cycle in the second quarter of next year.”
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