October 2025 Market Update

Australia’s Economy Holds Steady Amid Sticky Inflation and Global Tailwinds

Australia’s economy demonstrated resilience in September, navigating persistent inflation and global uncertainty with relative stability. The Reserve Bank of Australia (RBA) held the cash rate steady at 3.6%, signaling a wait-and-see approach as inflation proves more stubborn than expected.

Headline inflation ticked up from 2.8% to 3%, surprising markets and prompting economists to revise their rate cut expectations—now pushed back to late 2025 or early 2026. While core inflation eased slightly to 2.6%, edging closer to the RBA’s 2–3% target band, price pressures remain elevated in key sectors like housing and services.

Economic growth remained modest but positive, with GDP expanding 0.6% in the June quarter, buoyed by a rebound in consumer spending and solid wage growth. The unemployment rate held steady at 4.2%, reflecting a still-tight labor market.

However, consumer sentiment softened. The Westpac-Melbourne Institute Consumer Sentiment Index fell 3.1% in September, highlighting ongoing concerns around cost-of-living pressures and interest rates. In contrast, business confidence remained upbeat—particularly in retail and manufacturing—suggesting a degree of optimism in the corporate sector.

Despite the traditionally sluggish August–September period, equity markets remained near record highs. The ASX 200 was buoyed by strong performances in banking and mining stocks, while US equities continued to rally on the back of the AI-driven tech boom and growing expectations of Federal Reserve rate cuts.

Meanwhile, the Australian dollar briefly touched an 11-month high, supported by firm commodity prices and improved risk appetite, before easing slightly.