National Australia Bank (ASX:NAB) expects Australian first-quarter gross domestic product to rise 0.5% quarter on quarter and 1.7% year on year, broadly in line with the Reserve Bank of Australia's (RBA) monetary policy statement for May, according to a May 30 report by the bank.

Growth is driven by "solid" private sector activity, with positive contributions from business and dwelling investment, per the report.

However, household consumption growth showed signs of slowing, with partial indicators pointing to a loss of momentum. The unwinding of government subsidies may temporarily boost the headline figure, the report added.

Productivity is estimated to have improved modestly in the quarter, as output growth likely outpaced hours worked. However, unit labor costs remain elevated.

Looking ahead, NAB expects consumption to recover gradually, supported by real income gains, but held back by low savings, weak confidence, and slower population and public spending growth.

The bank flagged a weaker global backdrop as the biggest risk to the outlook, with potential impacts on business investment, employment, and household spending.

NAB expects growth to stay below the trend in 2025 before lifting to around 2.25% in 2026.