EWA Overview

Reserve Bank of Australia Decision: The Reserve Bank of Australia maintained its cash rate at 3.6% in its final meeting of 2025, reflecting market expectations and the lowest borrowing costs since April 2023.

Inflation and Economic Indicators: While inflation has eased since its peak in 2022, recent data indicates a potential rise in broader price pressures, prompting the bank to adopt a cautious approach in policy reassessment.

Market Reactions: Following the monetary policy decision, the Australian dollar increased to approximately $0.663, and government bond yields reached their highest level since November 2023.

Business Confidence Decline: The NAB Business Confidence Index fell to 1 in November 2025, the lowest since April, indicating weakening business sentiment amid a gradually rising unemployment rate and slowing employment growth.

Trade Surplus Growth: Australia's goods trade surplus increased to AUD 4.39 billion in October 2025, exceeding expectations and marking the largest surplus since July, driven by a 3.4% rise in exports, particularly in non-monetary gold.

Import Trends: Goods imports also rose by 2.0% to AUD 41.59 billion, reflecting strong domestic demand and early festive-season stocking, despite a decline in exports to the U.S. and China.

Market Performance: The S&P/ASX 200 Index rose 0.27% to around 8,570, with losses in gold stocks and rate-sensitive sectors offsetting gains in mining, while the Australian dollar strengthened to $0.661.

Economic Indicators: Despite a softer-than-expected GDP in Q3, the Australian economy continues to show growth, with a rebound in the manufacturing PMI signaling a return to growth.

Monthly Inflation Trends: Australia's Monthly Inflation Gauge rose 0.3% in October 2025, a slight decrease from 0.4% in September, while annual headline inflation surged to 3.2% in Q3 from 2.1% in Q2.

Underlying Price Pressure: The trimmed mean inflation measure increased to 3.0% in Q3, up from 2.7% in the previous quarter, indicating rising underlying price pressures.

Interest Rate Expectations: Following three interest rate cuts earlier this year, the Reserve Bank of Australia is expected to maintain current interest rates in its upcoming policy meeting.

Market Reactions: The S&P/ASX 200 Index fell 0.5% to 8,840, its lowest in over a month, as investors remained cautious ahead of the Reserve Bank's decision, while the Australian dollar rose to approximately $0.654.

Manufacturing Activity Decline: Australian manufacturing activity fell into contraction in October 2025, with the S&P Global Australia Manufacturing PMI dropping to 49.7 due to weakening demand and declining new orders.

Inflation and Household Spending: Australia's Monthly Inflation Gauge rose 0.3% in October, contributing to an annual inflation rate increase to 3.2% in Q3, while household spending saw a slight rise of 0.2% in September.

Job Ads and Housing Approvals: Job advertisements in Australia decreased by 2.2% in October, following a previous decline, while total dwelling approvals increased by 12% month-on-month in September.

Market Reactions: The S&P/ASX 200 Index fell 0.5% to its lowest level in over a month, as investors awaited the Reserve Bank of Australia's policy decision, while the Australian dollar rose slightly to around $0.654.

Fund Performance: Australia's Future Fund achieved a 13.7% gain for the year ending September 30, with total assets rising to A$261 billion, driven by strong performance in global equities, infrastructure, and alternative assets.

Economic Outlook: CEO Raphael Arndt highlighted the fund's readiness to navigate a multipolar world marked by strategic competition and rapid technological change, predicting higher nominal growth and inflation alongside uneven sector returns.

Leadership Change: The fund's leadership saw a transition with the departure of former chief investment officer Ben Samild, who took a new role as chief strategist at the Abu Dhabi Investment Council.

Inflation Trends: Recent economic indicators show that Australia's Q3 producer inflation reached a one-year high of 1.0% quarter-over-quarter, while the Q3 CPI unexpectedly surged to 3.2%, marking a 14-month high.

Australia's Critical Minerals Strategy: The Australian government is considering implementing mandated floor prices for critical minerals and investing in rare earth projects as part of a deal with the U.S., with discussions already underway with miners regarding a A$1.2 billion strategic reserve.

Geopolitical Context: This initiative is in response to rising tensions over China's dominance in the rare earth market and follows President Trump's threats of tariffs against Beijing's export controls, ahead of a scheduled meeting between Prime Minister Albanese and Trump.