Strong economic growth data and conflict in the Middle East has further ramped up pressure on Treasurer Jim Chalmers to pursue meaningful reforms in the May budget and lift Australia’s productivity potential.

Australian Bureau of Statistics data showed gross domestic product grew at 2.6 per cent in 2025 – the highest rate in nearly three years.

Despite the uptick in activity, economists warn the economy is not in rude health.

Given growth was not driven by productivity improvements, it indicated it would likely worsen inflation, said BDO chief economist Anders Magnusson.

“The release includes a concerning signal about productivity,” he said. 

“GDP per hour worked was flat in the December quarter, meaning economic growth came from Australians working more hours, not from producing more with each hour worked. 

“Without productivity gains, faster growth translates into inflation, rather than sustainably higher living standards.”

The Reserve Bank estimates the fastest growth rate the economy can sustain without pushing up inflation is about two per cent per annum.

The only way to increase the economy’s capacity and sustainably boost living standards is with a pick-up in investment and a lift in productivity, said EY chief economist Cherelle Murphy.

“While there are signs of this, including more optimistic capital expenditure expectations, more encouragement from improved policy is needed,” she said.

“The national accounts highlight the need for the government to move forward with productivity enhancing reforms in the 2026/27 budget.”

While productivity grew one per cent over 2025 – higher than in the previous year – productivity and the total size of the economy were well below where their pre-pandemic trends suggested they should be, said Jonathan Kearns, chief economist at Challenger.

“And it looks like that’s a gap we’re not going to make up.”

Dr Chalmers acknowledged the “pressing” economic challenges of inflation, productivity and global uncertainty, flagging that the budget would seek to address them.

“The budget will be very firmly focused on the inflation challenge in the near term, the longstanding productivity challenge and all of this global economic uncertainty, which is dialled up by events in the Middle East,” he told reporters on Wednesday.

Although higher GDP growth will do little to allay RBA fears about inflation, the underlying details do not suggest a sustained uplift in activity.

Much of the upside surprise in the headline figure came down to volatile items like inventories, said Westpac senior economist Pat Bustamante.

Household consumption growth was soft at 0.3 per cent over the quarter, but expiring electricity rebates and weak tobacco sales muddied the waters.

Given consumers have an outsized impact on the economy, the RBA will be closely watching household spending data from January, set to be released by the ABS on Thursday, to get a sense of the underlying pulse.

Hugs and tears from anxious family members greeted tired and weary Australian evacuees who managed to get on the first flight out from Dubai.

Landing in Sydney on a humid Wednesday night, an emotional Iman Krayem was surrounded by her son Youssef and husband Nazih.

She was stuck in the United Arab Emirates for several nights, on her way to see her sick father in Lebanon, when Iranian missiles struck the gilded city in response to a barrage of US and Israeli attacks.

“I was crying non-stop,” she told AAP minutes after clearing customs.

“It was so stressful, I didn’t have my luggage, I had no clothes but I am happy to be back home now.”

Among the more than 200 passengers who arrived were a group of high school students travelling to Istanbul for a robotics competition.

They were accompanied by several teachers from Baker College including Daiane Becker, who was carrying her one-year old daughter Clara clutching a green bunny.

“It was really hard not knowing what’s going to happen … and if things would calm down,” she said.

For charity worker Hawra Khalil, she was in Lebanon on a humanitarian trip feeding war-torn children in several cities.

Heeding the Australian government’s travel warning, Ms Khalil managed to catch a flight to Dubai where she was grounded with a colleague of hers.

She said being caught in a conflict zone where she felt buildings shook for a few days in the relative comfort of the Gulf monarchy drove home how other citizens in Arab countries have been faring in recent years.

“I just got a glimpse of it in Dubai and I had seen what people in Lebanon go through on a daily basis ten-fold,” she told AAP.

“It is scary, you feel threatened but I have it so much easier because what I witnessed is innocent families and innocent children starving and in poverty.”

Iran has fired hundreds of drones in recent days across several countries including Kuwait, Qatar and Saudi Arabia targeting American diplomatic and military sites in retaliation for US and Israeli strikes.

Mining executive Troy Barker landed in Dubai only for a day and was at a popular horse race on Saturday, where the Emirati ruler was also in attendance, when he saw drones and missiles across the city’s skyline.

“I saw a couple of missiles but I’ve worked in Africa for 20 years so I’ve seen many things,” he said.

He praised communications from Emirates airlines and the authorities on the ground, saying he was lucky to be home.

Foreign Minister Penny Wong earlier said she was pleased the first plane carrying Australians from Dubai to Sydney was on its way, as more than 115,000 Australians remain stranded in the region.

She revealed Prime Minister Anthony Albanese had lobbied Emirati president Mohammed bin Zayed Al Nahyan to ensure their safe exit.

“We know this is a very difficult time. We are conscious of how distressed many people are,” she told reporters in Canberra.

Fitch Ratings has cut Indonesia’s credit rating outlook to negative from ‌stable, citing increasing uncertainty and reduced credibility in policymaking, in a move that will add to investor concerns about Southeast Asia’s largest economy. 

Fitch became the second rating agency ‌to revise down Indonesia’s sovereign rating outlook this year, after Moody’s last month cut its outlook due to reduced predictability in policymaking.

Both agencies have maintained Indonesia at the second-to-lowest investment grade rating, and a negative outlook means the agency’s next rating action could be a downgrade.

The Moody’s outlook cut rattled Indonesia’s financial markets, and it came soon after index provider MSCI in January had flagged transparency issues in the stock market that triggered a $120 billion rout.

“The outlook revision reflects ‌increasing policy uncertainty and ‌erosion of Indonesia’s policy ⁠mix consistency and credibility amid growing centralisation of policymaking authority,” Fitch said in a statement on Wednesday.

“This could weaken the ​medium-term fiscal outlook, undermine investor sentiment, and put pressure on external buffers.”

Fitch’s decision was widely reported by local media ahead of the official announcement. The finance and economic ministries and the central bank did not immediately respond to requests for comment.

Among the drivers of the outlook downgrade is a potential substantial loosening of the fiscal and monetary policy-mix, stemming from the government’s focus on lifting economic growth to 8 per cent from around 5 per cent now, Fitch said.

The rupiah and local financial markets were already under pressure before the outlook downgrade, amid investor fears of a ​surge in global inflation after oil prices ⁠rose due to the war in Iran.

Canada’s prime minister wants Australia to help restore international order as he calls for “rapid de-escalation” in the Middle East.

Visiting Australia for the first time as leader, Mark Carney told the Lowy Institute in Sydney that coalitions with like-minded allies were needed more than ever after US and Israeli strikes on Iran were met with retaliatory attacks.

Mr Carney described Iran as a “serial offender of international law” and “principal source of instability and terrorism”.

He lambasted its targeting of several Gulf states in the region.

But he also diverted from his initial steadfast support of American and Israeli actions killing Ayatollah Ali Khameini, saying they needed to respect the rules of engagement.

“We take this position with some regret, because the current conflict is another example of the failure of the international order,” he told a packed audience on Wednesday evening.

He said Canada was prepared to assist in bringing an end to hostilities in the Middle East.

Canada and Australia had legitimacy and trust on their side and other countries looked to them for stability, he said.

Both nations had the capacity to rebuild a global order based on the values of respect for human rights, sovereignty and territorial integrity.

“Australia and Canada can’t compel like the great powers, but we can … set the agenda,” he said.

In a pointed criticism of military campaigns, Mr Carney noted “change through compulsion doesn’t last.”

He said unlike global superpowers “acting without constraint or respect for international norms or laws”, nimble middle-power coalitions had a tactical advantage.

“We can … shape the rules, and organise and build capacity through coalitions that deliver results at speed and global scale,” Mr Carney said.

“Middle powers have more power than many realise.”

Mr Carney touched on aspects of his blistering speech at the World Economic Forum in Davos, Switzerland that gained global attention, referring to the memorable line “if we’re not at the table, we’re on the menu”.

Earlier on Wednesday, he took steps to ensuring both Australia and Canada’s super-sized pension funds would co-operate more closely to compete on the global economic stage.

Nine Australian funds, representing 14 million accounts and $1.4 trillion in assets, inked an agreement with Canadian funds that would help get them get more bang for their investment buck.

The countries’ respective pension systems are forecast to manage a combined $20 trillion in assets by 2040.

As of 2024, Canadian direct investment into Australia was about $60 billion, while about $30 billion was headed in the other direction, the Canadian government said.

A business accused of having links to underworld figure Mick Gatto has hit out at a CFMEU corruption probe’s claims.

In an extraordinary move, the commissioner heading Queensland’s CFMEU inquiry Stuart Wood called a media conference to publicly question M1 Traffic Control’s new operation on the Gold Coast.

Senior counsel assisting Patrick Wheelahan linked the Queensland operation to CFMEU corruption exposed in Victoria in barrister Geoffrey Watson’s “Rotting from the Top” report.

The Queensland operation’s corporate structure was similar to Victoria’s M Group traffic control company, which allegedly had links with Gatto, Mr Wheelahan said.

However, M1 Queensland director Jordan Paragalli rejected the claims, telling AAP that he was the sole operator and had “absolutely nothing to do” with Gatto or Victorian corruption allegations.

“I have been here for 15 days,” he said, with nearby businesses confirming his business signs were posted just two days ago. 

“This is a separate venture, and yeah, while it’s under the same banner, it’s a completely separate venture with no CFMEU link to it or anything like that.”

The Queensland inquiry officials on Wednesday called a media conference outside a Gold Coast address shared by M1 Traffic Control QLD to appeal for information.

It marked the first time since the Fitzgerald inquiry into political corruption in the late 1980s that a commissioner held a public plea in Queensland while a legal probe was under way. 

“We’re charged with carrying out an investigation, and the terms of reference are very broad,” Mr Wheelahan said.

“We’re supported by the Queensland police, and it’s appropriate that we do this so that we can garner the support of the public, so that they can come forward with more information.”

Gatto was first linked to the M Group by Mr Watson’s report.

It identified “inexplicable favouritism” towards the group by the CFMEU, an arrangement that generated tens of millions of dollars.

Mr Wheelahan said it would be “remiss” for the inquiry not to explore potential links to Gatto as construction began before the 2032 Olympics in Brisbane.

“The money pot is clearly now going to be in Queensland in the build-up to the Olympics – I think $130 billion is going to be spent,” he said.

“Queensland does not want to end up like Victoria.”

Mr Wheelahan said M1 Traffic Control Group’s corporate structure was similar to the company’s Victorian set-up, naming Jordan David Paragalli as the Queensland company director.

The Watson report found that father Tony Paragalli was a frontman for Gatto, nominated as a “dummy director” for at least 28 companies in areas including security services, transport, hotels and telecommunications. 

Jordan Paragalli confirmed Tony Paragalli was his father, but labelled the CFMEU inquiry’s allegations false and disrespectful.

He claimed the CFMEU inquiry had made “absolutely no attempt” to contact him before airing the allegations.

“This is going to cause detrimental damage to my business and the associated businesses as well that are on the same block because they would have been advertised in the background,” he said. 

“It is a separate company. It is run by myself … so I find it incredibly disrespectful. It could not be any more false.

“If I have to move back to Melbourne, because this is going to harm my brand, who’s going to foot the bill –  my rent, and all that stuff like that?”

AAP attempted to contact Tony Paragalli for comment.

Queensland’s CFMEU told AAP it had no connection to the M1 group. 

Mr Wood said no findings had been made against the M1 group’s Queensland arm, which was entitled to procedural fairness.

The commissioner could not rule out further public appeals as the inquiry continued, with a final report due in July.

Multinational payments giant Stripe is stepping up its hiring of software engineers in Sydney, where it recently opened a new Australian headquarters.

Stripe’s managing director for Australia and New Zealand, Karl Durrance, gave a handful of journalists a brief tour of the Sydney CBD office building, where it has about 100 employees and is looking to hire more.

Those software engineers would be working on Stripe’s core systems, Mr Durrance said, adding that the Kent Street office had been deemed a global engineering hub for the $227 billion company.

“I think this is a really big moment in time,” he said.

“This is no longer a remote relationship office, this is now a core engineering office for Stripe, which I think is reflective of the talent pool availability here, which has been seen as very strong, and also Stripe’s investment in the local economy, which we’re excited about,” he said.

Based in San Francisco and Dublin, Stripe has about 8,500 employees globally. 

It had another office in Melbourne and an “emerging office” in Auckland, Mr Durrance said.

In 2025 the financial infrastructure company processed $2.7 trillion in transactions for five million businesses, including all of the top AI companies and many of the largest blue chips.

In Australia, Stripe has more than a million users, from “solopreneurs” who use Stripe to process payments for their side hustle to very large ASX-listed companies such as Origin Energy, as well as streaming service Stan and AI start-ups Heidi and Lorikeet.

Mr Durrance and Stripe executive Daniel Miller told reporters that Stripe was working with OpenAI to develop standards for “agentic commerce”, so shopping could one day be handled by AI chatbots like ChatGPT.

Right now that involves a protocol for merchants and chatbots to share information, as well as secure payment that lets agents initiate payments without exposing credentials.

Their vision is that eventually a parent might be able to tell their chatbot to get their back-to-school shopping done, give it a budget, and trust that the agent would weigh the choices and make the purchases on their behalf.

‌China will increase its output of high-quality consumer goods and foster ‌new growth points for services consumption in efforts to boost domestic demand ‌aimed at propping up economic growth this year.

Consumption is the main driver of the country’s economy, having contributed 52 per cent of the country’s economic growth last year, National People’s Congress (NPC) spokesman Lou ‌Qinjian told reporters ‌on Wednesday.

Total ⁠retail sales of consumer goods exceeded ​50 trillion yuan ($A10.3 trillion) for the first time last year, he said.

Lou said China would also promote high-quality employment and work to raise the incomes of urban and rural people to enhance their ⁠capacity to consume.

Chinese policymakers have ‌been ​struggling to reverse stubborn weakness in domestic demand. The imbalance ​of supply and demand ‌in the economy has also kept multi-year deflationary pressures on ​factory-gate prices.

The NPC’s Standing Committee would oversee the formation of a unified domestic market and revitalise rural areas, ​Lou ​said.

Efforts this year will ​include formulating laws and plans for ‌social and medical security including for childcare, as well as to invest more resources in the livelihoods of the people.

“So that the people can consume, dare to consume and ​are willing to consume,” Lou said.

Explosions have sounded in Iran’s capital city as its war with the US and Israel enters a fifth day following earlier strikes on an Iranian nuclear site and retaliatory strikes by the Islamic Republic across the Gulf region.

Iranian state television reported explosions around Tehran as dawn broke on Wednesday. 

Meanwhile, Israel said its air defences were activated due to incoming missile fire from Iran.

Five days into a war that US President Donald Trump suggested would last several weeks or longer, nearly 800 people have been killed in Iran, including some Trump said he had considered as possible future leaders of the country.

Explosions also hit Lebanon, where Israel said it is retaliating against Hezbollah militants. 

Lebanon’s state-run media reported that at least four people were killed in an Israeli strike that hit a residential complex in the city of Baalbeck.

A day earlier, Israel launched airstrikes against Iranian missile launchers and a nuclear research site, and Iran struck back against Israel and others, targeting US embassies and disrupting energy supplies and travel.

The American embassy in Saudi Arabia and the US consulate in the United Arab Emirates came under drone attacks.

Iran has fired dozens of ballistic missiles at Israel, though most of the incoming fire has been intercepted. Eleven people in Israel have been killed since the conflict began.

In other developments, the Pentagon identified four US Army Reserve soldiers who were killed in a drone strike on Sunday at a command centre in Kuwait. The strike also killed two other service members.

The spiralling nature of the war raised questions about when and how it would end.

Trump’s administration has offered various objectives, including destroying Iran’s missile capabilities, wiping out its navy, preventing it from obtaining a nuclear weapon and ensuring it cannot continue to support allied armed groups.

While the initial US-Israeli strikes killed Iranian Supreme Leader Ayatollah Ali Khamenei and Trump urged Iranians to overthrow their government, senior administration officials have since said regime change was not the goal.

Trump on Tuesday seemed to downplay the chances of the war ending Iran’s theocratic rule, saying that “someone from within” the Iranian regime might be the best choice to take power once the US-Israel campaign is finished.

Trump said Reza Pahlavi, the exiled son of Iran’s toppled shah, is not someone that his administration has considered in depth to take over.

As far as possible leaders inside Iran, “the people we had in mind are dead”, Trump said.

“I guess the worst case would be do this, and then somebody takes over who’s as bad as the previous person, right? That could happen,” Trump said.

“We don’t want that to happen.”

Iran’s leaders are scrambling to replace Khamenei, who ruled the country for 37 years. 

Admiral Brad Cooper, the top US military commander in the Middle East, said American forces have struck nearly 2000 targets in Iran since the war began.

In a video posted on X, Cooper said the US has “severely degraded Iran’s air defences” and taken out hundreds of ballistic missiles, launchers and drones.

“We’ve just begun,” Cooper said.

Satellite images published olorado-based company Vantor showed the domed roof of Iran’s presidential complex in Tehran had been destroyed, supporting Israel’s claim of an overnight strike. 

The Israeli military said it also conducted airstrikes on Iranian sites that produce and store ballistic missiles, and that it destroyed what it called Iran’s secret, underground nuclear headquarters. Without providing evidence, it said the site was used for research “to develop a key component for nuclear weapons”.

Iran has said it has not enriched uranium since June.

An attack from two drones on the US Embassy in Riyadh caused a “limited fire,” according to the Saudi Arabian Defense Ministry, and the embassy urged Americans to avoid the compound.

An Iranian drone struck a parking lot outside the US consulate in Dubai, sparking a small fire, Secretary of State Marco Rubio said in Washington. He said all personnel were accounted for.

US embassies in Saudi Arabia, Kuwait and Lebanon were closed to the public.

The US State Department ordered the evacuation of non-emergency personnel and family in Kuwait, Bahrain, Iraq, Qatar, Jordan and the United Arab Emirates. And US citizens were urged to leave more than a dozen Middle Eastern countries, though many were stranded because of airspace closures.

The State Department said it’s preparing military and charter flights for Americans wanting to leave the Middle East. Other countries were arranging flights for their citizens.

The US-Israeli strikes have killed at least 787 people in Iran, according to the Red Crescent Society. 

In Lebanon, where Israel launched retaliatory strikes on the Iranian-supported militant group Hezbollah, 50 people were killed, including seven children, Lebanon’s health ministry said.

Kuwait, which had previously reported a single death, said Wednesday that an 11-year-old girl was killed by falling shrapnel as Kuwaiti forces were intercepting “hostile aerial targets.” In addition, three people were killed in the United Arab Emirates and one in Bahrain.

Ukraine can help Australia build up its own sovereign capabilities, its top diplomat in Canberra says, as the nation looks to attract businesses to take part in its reconstruction efforts.

Russia’s full-scale invasion has entered its fifth year, as analysis estimates up to 325,000 of its troops have been killed between February 2022 and December 2025.

It’s estimated between 100,000 and 140,000 people from the Ukrainian military have been killed defending their nation.

A Ukrainian delegation of MPs visited Parliament House in Canberra on Wednesday where they met with Australian ministers, politicians and business leaders to discuss defence and trade cooperation, and investment opportunities.

Ukrainian ambassador Vasyl Myroshnychenko said his nation was trying to convince the Albanese government to consider appointing a special envoy on his nation’s reconstruction.

“There will be a lot that will need to be rebuilt … there are many different sectors where Australians can contribute to and make money out of it,” he said on Wednesday.

He described the area of defence technology as “low-hanging fruit” as the government could invest this way.

“We can definitely set up production here in Australia, and this is how we can help Australia to build its own sovereign capabilities in new modern day technology, which has been developed in Ukraine as a result of Russia’s war,” Mr Myroshnychenko said.

Ukrainian MP Galyna Mykhailiuk, who is leading the delegation, said the war’s impact on her nation was difficult to describe.

“Almost every single family in Ukraine has someone on the front line or someone who died because of the war,” she said.

Dr Mykhailiuk noted the sharp decline in military and financial aid from Australia, which has provided a total of $1.7 billion in support since 2022.

She said the donation of Bushmasters had stopped in 2023, and that they had been life-saving.

Ukrainian MP Anastasiia Radina said her six-year-old son had no memory of what life was life before the war, which started when he was two.

“We have a whole generation growing up who are completely unfamiliar with the concept of peace,” she said.

“This will have its implications for years to come.”

Labor senator Deborah O’Neill, co-chair of the Australian Parliamentary Friends of Ukraine group which launches on Wednesday, said Kyiv stood on the frontline of democracy.

“The Australian parliament stands in lockstep with the brave sacrifices of the men, women and children enduring barbaric Russian bombardment,” she said.

“As parliamentarians, we will continue to advocate for a peace that upholds Ukraine’s sovereignty and territorial integrity.”

Beloved sports broadcaster Dennis Cometti, who coined some of the AFL’s most memorable phrases, has died aged 76.

Cometti’s distinguished career spanned more than half a century across a range of sports but he was best known for his work as an AFL commentator, where his dulcet tones and quick wit made him a household name.

‘Cometti-isms’ such as “centimetre perfect”, “went in optimistically, came out misty-optically” and “he came up behind him like a librarian” became part of the footy lexicon.

Born in Geraldton in Western Australia, Cometti played 40 matches for West Perth in the WAFL before launching into a full-time broadcasting career.

He worked for the ABC from 1972 to 1985, where he broadcast his first Test cricket match aged 23.

Cometti joined Seven in 1986 and spent the better part of the next three decades at the network, also serving stints at Nine, 3AW and Triple M.

Along with long-time commentary partner Bruce McAvaney, he called some of the AFL’s most memorable moments.

He retired from full-time commentary in 2016 and called his final AFL game in 2021 when the grand final was held in Perth.

Cometti, who covered three Summer Olympic Games – 1992 in Barcelona, 1996 in Atlanta and 2000 in Sydney – was inducted into the Sport Australia Hall of Fame and a member of the Order of Australia.

AFL chief executive Andrew Dillon said Cometti was a legend of the game, paying tribute to his “incredible turns of phrase”.

“I think what he’ll be best remembered for from a footy point of view is just the way that he brought our game to life through his commentary,” Dillon told reporters.

“It’s a really sad day for the AFL, for the Cometti family. Our condolences go out to them and he will be remembered so fondly by all at the AFL.”