"Today's national accounts shows Australia's economy has weakened in the first quarter 2026, sending a worrying signal for our resilience as the impacts of the global energy crisis mount," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"Australian real GDP growth slowed to 0.3% in the first quarter of 2026, reversing a recovery trend across 2025. Business investment surged (5.7% q/q.) driven by the building of datacentres, but was offset by a large and widening trade deficit.
"The first quarter 2026 data largely does not incorporate the effects of the global energy crisis, which have begun to impact economic activity from the second quarter – after today's data period.
"Datacentre builds are now Australia's primary investment driver, with the ICT industry accounting for 85% of the uplift in private capital expenditure over the last year. However, the broader economic benefits are more muted to high reliance on imported equipment for these builds.
"Government spending fell in the quarter as household energy subsidies ended. This removed one of the major supports which had contributed to the slightly improved economic picture in 2025.
"Worryingly, productivity went backwards in the quarter and has again fallen back to pre-pandemic levels. Australia has now had no overall productivity growth for six years.
"It is extremely concerning that Australia's economy was weakening on the eve of the global energy crisis.
"The impacts of surging prices for fuel and industrial commodities, and the inhibiting effects of uncertainty on investment and consumer confidence, are still to play out. What today's data tells us is we go into the crisis which may last for a very long time from a position of weakness, not strength.
"While it is heartening to see the installation of new datacentre capacity, we are at risk of becoming far too dependent on it. The datacentre boom obscures the fact there is very little investment growth across the rest of the private sector.
"Business is now preparing for the peak impacts of the energy crisis which are expected to arrive middle to late this year. Government needs a plan to support the economy through the difficult times on the horizon," Mr Willox said.
Media Enquiries:
Gemma Daley – 0418 148 821
The key driver of growth in Quarter 1 was business investment, which contributed 0.7% to economic growth in the quarter. However, this was fully offset by growing trade deficit, driven by falling mining exports and surging imports of electrical equipment. The rise in investment and fall in the trade balance are both due to datacentre builds. Public spending fell as household energy subsidies terminated, and ceased to be a contributor to growth.
Business investment lifted 5.7% p.a. in Quarter 1, and is primarily driven by datacentre builds. ICT investment has surged from around $2 to $8 billion per quarter as a result of datacentres. Most investment is in equipment for fitouts. We estimated datacentres accounted for 85% of the growth capital expenditure over the last year, and almost all in the first quarter of 2026. This reveals the uplift in investment is almost wholly reliant on the datacentre boom, with negligible investment growth in other industries.
Labour productivity fell again in the Quarter 1 2026, declining by 0.6%. This reversed most of the minor productivity gains seen in 2025. Productivity declines were seen across both the market and non-market sectors, pointing to weakness across the economy. Australia’s productivity remains at the same level of late 2019. This implies six years without any overall productivity growth, the longest such run in the recorded data.
For further information or assistance please contact
economics@australianindustrygroup.com.au or
Visit our Research and Economics Resource Centre
Media Enquiries:
Gemma Daley – 0418 148 821
Business investment lifted 5.7% p.a. in Quarter 1, and is primarily driven by datacentre builds. ICT investment has surged from around $2 to $8 billion per quarter as a result of datacentres. Most investment is in equipment for fitouts. We estimated datacentres accounted for 85% of the growth capital expenditure over the last year, and almost all in the first quarter of 2026. This reveals the uplift in investment is almost wholly reliant on the datacentre boom, with negligible investment growth in other industries.
\nLabour productivity fell again in the Quarter 1 2026, declining by 0.6%. This reversed most of the minor productivity gains seen in 2025. Productivity declines were seen across both the market and non-market sectors, pointing to weakness across the economy. Australia’s productivity remains at the same level of late 2019. This implies six years without any overall productivity growth, the longest such run in the recorded data.
\nFor further information or assistance please contact
\neconomics@australianindustrygroup.com.au or
\nVisit our Research and Economics Resource Centre
\nMedia Enquiries:
Gemma Daley – 0418 148 821