Summing up his view of the year ahead, CommBank’s Chief Economist and Head of Global Economic & Markets Research Luke Yeaman chose the word uncertain.
“The outlook in 2026 is strengthening, it’s brightening, but there is a huge amount of volatility and that's also going to be one of the key buzzwords for 2026,” he said.
Head of Australian Economics, Belinda Allen, pointed to tension as the defining characteristic of the outlook, with a focus on the push-and-pull of positive and negative factors affecting almost every economic indicator in Australia right now.
“The economy is improving, which is a really positive thing, but employment growth is slowing and inflation is showing signs of being a little bit stickier, so these are all really conflicting signs for the Australian economy and that's creating a bit of tension in the interest rate outlook and what it means for the Australian economy,” she said.
When Joseph Capurso, Head of FX, International & Geoeconomics, opted for his word, ‘risky’, he had an eye on the international ‘wildcards’ that promise long-term economic impacts.
“We simply do not know the full impact of these trade tensions between the US and China and the flow-on impacts to the rest of the world. We also have a lot of instability in countries like Japan and Europe, and that just increases the risk to the global economic outlook,” he said.
The threat to US Federal Reserve independence is also seen as a risk, with a loss of Fed credibility undermining markets and driving up long-term inflation expectations.
The economists agree the outlook is at a crossroads, and that while the Australian economy is likely to steer a middle path in 2026, nothing can be taken for granted.
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