News
Wealth Pi Fortnightly Economic Snapshot
Interest Rates
RBA
On the 5th May 2026 meeting, the RBA increased the cash rate by 25 basis points to 4.35%, reflecting renewed inflationary pressure and heightened external uncertainty. Inflation had picked up materially through the second half of 2025 and early 2026, with higher fuel and commodity prices linked to the Middle East conflict adding further near-term pressure. The RBA also noted signs of broader cost pass-through, as firms facing higher input costs seek to raise prices for goods and services.
The next RBA Board meeting and Official Cash Rate announcement will be on the 16th June 2026.
As at the 5th of May, the ASX 30 Day Interbank Cash Rate Futures June 2026 contract was trading at 95.63, indicating a 17% expectation of an interest rate increase to 4.60% at the next RBA Board meeting.
While the baseline forecast assumes energy prices ease and inflation gradually declines as demand slows, the Board assessed that inflation is likely to remain above target for some time, with risks still tilted to the upside. Financial conditions have already tightened through higher money market rates, government bond yields and an appreciating exchange rate; however, credit remains available to households and businesses.
Overall, the decision reinforces a more restrictive policy environment, with the RBA remaining data-dependent and prepared to act further if inflation expectations or price pressures become more persistent.
Australian Markets
Australia’s economic conditions remain resilient, although growth is moderating based on the latest ABS data. Real GDP increased by 0.8% in the December quarter 2025 and 2.6% over the year, supported by both public and private demand, indicating the economy continues to expand but at a more measured pace.
The labour market remains stable but is gradually easing. As at March 2026, the unemployment rate held at 4.3%, with participation at 66.8% and underemployment at 5.9%. This suggests labour conditions remain solid, although capacity is no longer tightening.
Inflation remains a key macroeconomic downside risk. The latest ABS data shows annual CPI rose to 4.6% in March 2026, while trimmed mean inflation remained at 3.3%, indicating that underlying price pressures remain persistent and above the RBA’s 2%–3% target band. Recent forecasts also suggest headline inflation could remain elevated in 2026, potentially ranging around 4.0%–5.4%, driven by energy prices, supply-side pressures and sticky underlying inflation.
Recent economist forecasts suggest Australia is moving into a slower-growth, higher-inflation environment, rather than a broad contraction. GDP growth is expected to moderate materially, with forecasts ranging from around 1.0% to 2.0% in 2026, while unemployment is expected to drift toward 5.0% by late 2026 under more cautious scenarios.
Overall, the near-term outlook is for weaker private demand, elevated funding costs and greater reliance on public spending, while structural housing demand remains supported by population growth and constrained supply.
Global Markets
The global picture has turned sharply worse this past quarter. In its April 2026 World Economic Outlook, the IMF pointed out that the world economy had been tracking a steady expansion until war broke out in the Middle East and knocked it off course. Under the IMF’s reference scenario — which assumes the conflict is short-lived and energy prices rise around 19% in 2026 — global growth is now expected to slow to 3.1% this year (down from 3.4% in 2025), and global headline inflation is set to climb to 4.4%, breaking clearly from the disinflation trend of recent years. If things get worse, the IMF’s adverse scenario sees growth dropping to 2.5% and inflation rising to 5.4%; in the severe scenario, growth falls to 2.0% and inflation runs above 6%.
Downside risks still dominate. A longer conflict, a prolonged closure of the Strait of Hormuz, deeper geopolitical fragmentation, or fresh trade tensions could each drag growth further and add volatility to financial markets. For Australia, the impact cuts both ways. As the world’s third-largest LNG exporter and largest metallurgical coal exporter, higher energy prices lift export earnings and national income. On the other hand, Australia produces only about 5.6% of its own oil demand, its two remaining refineries cover just 17% of refined product needs, and around 80% of refined petroleum is imported from Asian refineries — combined with the lowest oil stockpile levels of any IEA member, this means higher fuel prices still feed straight through to households and businesses.
Property
Australia’s residential property market remained relatively resilient through early 2026, although conditions have become increasingly fragmented across regions and price points. National dwelling values continued to rise during Q1 2026, supported by structural housing undersupply, strong population growth and persistently tight rental conditions. However, momentum has clearly moderated following the RBA’s May 2026 cash rate increase to 4.35%, with higher borrowing costs and weaker consumer confidence beginning to weigh on buyer activity and affordability. National home value growth slowed to 0.3% in April 2026, the weakest monthly increase in almost a year, while Sydney and Melbourne have entered a mild correction phase, with values declining from their late-2025 peaks. By contrast, Perth, Brisbane and Adelaide continue to outperform, supported by relative affordability, interstate migration and constrained housing supply.
Supply-side pressures remain a key theme across the market. Annual dwelling approvals totalled approximately 198,000 dwellings to March 2026, remaining materially below the Federal Housing Accord target of around 240,000 dwellings per annum. Rising construction costs, labour shortages and elevated financing costs continue to delay new housing delivery, reinforcing the national housing shortage. At the same time, rental markets remain exceptionally tight, with vacancy rates remaining near historic lows across most capital cities, supporting ongoing rental growth and providing a floor for dwelling values despite softer owner-occupier demand.
Market sentiment has softened further amid renewed inflation concerns and expectations that interest rates may remain higher for longer. Affordability constraints are becoming more visible, particularly across Sydney and Melbourne, where selling conditions have weakened modestly and price growth has stalled. Nevertheless, underlying housing fundamentals remain supportive over the medium term, particularly in undersupplied mid-sized capitals and regional markets where population inflows and limited new supply continue to sustain demand.
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