ANZ have recently released their Commercial Property Insights paper for Q4 2025, covering Australia’s economic outlook and the key themes to watch in the Property sector in 2026. The report looks at the challenges of improving our housing supply and affordability, and finds that the construction outlook is more positive than it has been in recent years. In the commercial space, supply of new buildings is also having an impact on the Industrial and Office segments, as the latter continues to muddle through a period of structural change.
Australia’s private sector recovering?
Despite global uncertainty, Australia’s economy has been broadly resilient. Economic growth accelerated in Q2 as GDP lifted 0.6% q/q to be 1.8% higher over the year. The rise was driven by the private sector, particularly a 0.9% q/q increase in household consumption. Public demand recorded no contribution to GDP growth over H1 2025 but is still up 3.0% y/y. ANZ Research does not expect this softness in public demand to continue. Over Q3, some of the activity data has moderated a little. The upward trend in consumer confidence has stalled and household spending volumes grew just 0.2% q/q in Q3, down from the 0.9% q/q result in Q2. ANZ Research also think there has been some mild easing in the labour market. The unemployment rate rose to 4.5% in September, and some forward indicators like ANZ-Indeed Australian Job Ads have eased recently. While ANZ Research do not expect this to be the start of an upward trend in the unemployment rate, the rise has come at a time when inflation has also picked up. The cooling of inflation stalled in Q3. The ‘trimmed mean’ metric, the RBA’s preferred measure of underlying inflation, came at 3.0% y/y. This means trimmed mean inflation is at the very top of the RBA’s 2-3% target band. It was also the first rise in annual growth since Q4 2022.
The rise in both inflation and the unemployment rate complicates the picture for the RBA
In a unanimous decision, the RBA’s Monetary Policy Board left the cash rate on hold at 3.60% in November. The decision was largely driven by the higher quarterly inflation data. But the RBA was less concerned about the inflation outlook than ANZ Research expected and noted that some of the increase in trimmed mean inflation was due to “temporary factors”. Components like property rates and tobacco recorded sharp rises in Q3, which flowed through to the trimmed mean measure. The RBA is more concerned about other components like market services inflation because this is influenced by domestic price pressures like wages. The RBA also acknowledged a “recent easing” in labour market conditions but still described it as “a little tight”. The RBA revised up its expectations of the unemployment rate but doesn’t expect the recent move higher in the unemployment rate to run further. Looking ahead the RBA noted that there are “risks in both directions to the inflation and employment outlook.” ANZ Research think the RBA will take a data-dependent approach from here as they watch to see how the data evolves. ANZ Research expects just one more 25bp rate cut in February 2026, and for the cash rate to then stay at 3.35% for an extended period. There is a risk that the final rate cut ends up occurring later, such as in May, after the next two quarterly inflation prints
Important Information:
ANZ Private Bankers are representatives of Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ), the holder of an Australian Financial Services Licence.
The information provided is general in nature only and does not take into account any person’s personal objectives, financial situation or needs. Please consider its appropriateness to you before making any investment decisions.
ANZ Commercial provides banking products and services to more than 600,000 businesses, as well as high net-worth private banking clients across Australia. ANZ aims to be the leading bank for Australian businesses looking to start, run or grow their business, and the private bank of choice for multi-generational families.
