Australian economic and financial markets update | RBA Chart Pack April 2025

If a picture paints a thousand words, then this collection of charts should do a pretty good job of painting the landscape as it affects our economy and our property markets.

Each month the RBA summarises macroeconomic and financial market trends in Australia by providing a detailed chart pack.

World Economy

• Australia's economy doesn't operate in isolation, so it's critical to keep track of how the economies of our major trading partners are performing.
• The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability over the last few years but now Trump's tariffs  are causing concern.
• CBA's economists say the global impact of Trump's tariffs could be large if China's economy slows in response to the tariffs, although they expect Chinese authorities to deploy additional stimulus to prevent China's economy falling short of its "around 5 per cent" GDP growth target. A marked slowdown in China's economy will have ramifications for Australia, so we'll have to wait and see. The indirect impact from our trading relationships with other economies, especially China, is more uncertain and will take some time to unpack.
• The International Monetary Fund (IMF) recently published its latest update on the state of the world economy, predicting global growth at 3.3 percent both in 2025 and 2026, below the historical (2000–19) average of 3.7 percent. Their report suggests...
• The forecast for 2025 is broadly unchanged from that in the October 2024 World Economic Outlook (WEO), primarily on account of an upward revision in the United States offsetting downward revisions in other major economies.
• Global headline inflation is expected to decline to 4.2 percent in 2025 and to 3.5 percent in 2026, converging back to target earlier in advanced economies than in emerging market and developing economies.

•  Inflation around the world has peaked, and that should make it easier for the RBA to get inflation under control in Australia, even though the Trump tariffs may be inflationary.

Australia's Economy

• The Australian economy is currently facing a number of challenges, yet it is still performing more strongly and creating jobs at record levels.

• When the Reserve Bank Board kept interest rates on hold in April, financial market pricing suggested there was a 70 per cent chance that the RBA would cut rates in May. But after Trump's tariff plan was announced, that jumped to a 90 per cent chance. Financial markets also think there will be another rate cut by August, and a third by November.

• Sure, over the last year consumer confidence has fallen, as has business confidence and building approvals have fallen, but residential property loans are rising and loans to investors are up 31% over the last year and house prices generally keep rising.

• However, Australian has been in a per capita recession since December 2022 with GDP per capita falling for seven consecutive quarters. This is the longest decline since records began in 1973. 

• In trend terms, in February 2025:

  • unemployment rate remained at 4.0%.
  • participation rate remained at 67.0%.
  • employment increased to 14,547,800.
  • employment to population ratio decreased to 64.2%.
  • underemployment remained at 5.9%.
  • monthly hours worked increased to 1,980 million.
• At the same time, wages are slowly rising, and though retail spending is slowing, many are still spending up big.
• During the last few years rents skyrocketed, adding to inflationary pressures, and, of course, house prices are rising across the nation.

• The Consumer Price Index (CPI)  rose 0.2% December quarter.
• Annual CPI inflation was 2.4 per cent in the December quarter, down from 2.8 per cent in the September quarter. The main reasons for lower CPI inflation were due to a fall in prices for electricity and automotive fuel and moderating price rises for new dwellings.
• The Trimmed mean provides a view of underlying inflation by reducing the effect of irregular or temporary price changes that can impact the CPI. This quarter the Trimmed mean excluded the falls in both electricity and automotive fuel, alongside other large price rises and falls. Trimmed mean annual inflation was 3.2 per cent, down from 3.6 per cent in the September quarter.

Household Sector

• The following chart shows how the disposable income for Aussie households has dropped over the last year as they have grappled with rising costs, yet it has picked up recently.
• Despite the Reserve Bank's best efforts to slow down household spending, we’re still spending up big on discretionary items such as clothes, restaurants, and lifestyle, defying cost of living pressures.
• According to the ABS: in January:
  • Household spending rose 0.4% month-on-month on a current price, seasonally adjusted basis.
  • In seasonally adjusted, current price terms, household spending increased for five of the nine spending categories. The largest increases were in:
    • health (+2.5%)
    • miscellaneous goods and services (+1.2%)
    • transport (+1.1%).
  • In seasonally adjusted, current price terms, household spending on goods fell 0.6% month-on-month, driven by decreased spending on purchase of vehicles, cigarettes and tobacco, and furniture, floor coverings and household goods.
• In seasonally adjusted, current price terms, household spending increased for all states. The strongest increases were in:
  • Northern Territory (+1.8%)
  • Australian Capital Territory (+0.6%)
  • Victoria, Queensland and Western Australia (+0.5%).

This chart also shows our savings ratio has now dropped to below pre-pandemic levels as we keep spending our stashed cash to support our lifestyles.

• I keep careful track of consumer confidence because it's a good leading indicator of what's ahead for our economy and property markets.
• The media's continual barrage of negative news about the economy, inflation and interest rates is having a significant impact on consumer sentiment.
• Lately, consumer confidence has been bouncing up from historically low levels.
• I see consumer confidence rising moving forward after the election as Aussies realise inflation has peaked and that interest rates will keep falling.

• While rising interest rates and inflation have eaten away at the average household budget, in general, Aussies have significantly more equity in their homes than they had before the pandemic, and they started the recent rising interest rate cycle with considerably more savings stashed in their savings or offset accounts than they had at the beginning the pandemic.
• The following chart shows our net wealth position, and that our main assets are in real estate (particularly our homes) and financial assets (including our superannuation.)
• As you can see, the net wealth position of Australian households is still high since asset growth has outpaced the increased debt levels, meaning our net wealth position, while falling a little lately, is very strong.
• The Australian residential property market is valued at over $11.1 trillion, yet there is only around $2.4 trillion worth of debt against this large asset base. In fact, 50% of homeowners don't have a mortgage against their homes.

• Also read:This week’s Australian Property Market Update – Latest Data, State by State May 13th 2025
• Also read:Brisbane Property Market Forecast [2025] – What’s Ahead & Where to Invest
• Also read:Melbourne property market forecast for 2025 | Is it a good time to invest in Melbourne?
• Also read:Latest property price forecasts for 2025 revealed. What’s ahead in our housing markets in the next year or two?
• Also read:Sydney property market forecast for 2025. Is it a good time to invest in Sydney?

• We have now experienced 25 months of property growth, however our housing markets have been very fragmented.
• Australian property values reached new heights in March, reversing a recent short downward trend. Values increased 0.4% over the month, the second consecutive month of growth in the national index, following a short three-month decline where values dipped 0.5%. Every capital city except Hobart recorded a positive change. Improved sentiment following the February rate cut is likely the biggest driver of the turnaround in values.
  
• Currently, Australia has a shortfall of housing, which is particularly showing up in our rental markets with historically low vacancy rates and skyrocketing rents.
• The government has a plan to build 1.2 million homes in the next 5 years, but I can't see how this will be achieved.
• The cost of residential construction has risen substantially in the last few years, in part because of the lack of available skilled labour and supply chain restrictions.
• This means the cost to build new apartments has risen to such an extent that most developments on the drawing board (see the following chart of dwelling approvals) are not currently financially viable and won’t be built until the market is prepared to pay substantially more than the current prices.
• It has been estimated that currently we have a deficit of over 200,000 properties, something that won't be made up any time soon.
• In other words... there is no end in sight for the undersupply of dwellings. It also means that there is substantial inbuilt equity in established properties as their replacement cost is very much higher than their current market value.

While the property pessimists were making a fuss about low housing loan commitments, which are clearly a leading indicator of what's ahead for our property markets, the following chart shows that they have picked up recently and are well above long-term averages.

In particular, investor lending is up over 30% in the last 12 months. In other words, strategic investors are taking advantage of the current window of opportunity to get into the housing market.

Business Sector

Labour Markets

• Australia's labour market continues to show impressive resilience in the face of high-interest rates and unprecedented global challenges.
• The ABS has reported the following Key Statistics

• The labour force participation rate is an estimate of an economy’s active workforce. The formula is the number of people ages 16 and older who are employed or actively seeking employment, divided by the total non-institutionalized, civilian working-age population.
• The participation rate in Australia averaged 63.51% from 1978 until 2022, as you can see from the chart below the participation rate has increased over the last few years as a bigger percentage of Australians have entered or re-entered the workforce.

• As you can see from the chart below, service-related industries have had significant growth, and in particular, there has been strong growth in the healthcare, accommodation and food services industries.

• Currently, there are 328,900 jobs advertised a decrease of 4.5% from November 2024.
  • Private sector vacancies were 291,700, a decrease of 5.4% from November 2024.
  • Public sector vacancies were 37,200, an increase of 3.0% from November 2024.

• While national average wages have underperformed inflation over the last couple of years, meaning that “real” wages have actually fallen, we are now experiencing moderate wage increases.
• Recently the Fair Works Ombudsman increased the minimum award wage.

Interest Rates

• Interest rate levels set by the RBA respond to changes in inflation. When rates rise, they slow economic growth and discourage borrowing, typically signalling a strong economy. On the other hand, low interest rates promote economic growth.
• When the Reserve Bank Board kept interest rates on hold in April, financial market pricing suggested there was a 70 per cent chance that the RBA would cut rates in May. But after Trump's tariff plan was announced, that jumped to a 90 per cent chance. Financial markets also think there will be another rate cut by August, and a third by November.
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• Despite the sharp rise in interest rates over the last few years, home loan arrears remain at post-GFC lows, defying those property pessimists who forecast that significant levels of mortgage stress would lead to forced sales by homeowners who got over their heads in debt.