The December quarter delivered more uncertainty than most expected.
Just as inflation looked like it was easing, it re-accelerated.
Just as rate cuts seemed likely in 2026, talk shifted back to possible rises.
And just as global tensions appeared to be cooling, fresh geopolitical risks emerged.
Despite this backdrop, Australian households showed resilience — spending strongly through Christmas and keeping momentum in the economy.
Here’s what it all means for your money, your mortgage, and your long-term wealth.
Geopolitics, Oil Markets and What It Means for Australians
Early January saw a major escalation in Venezuela involving the United States, which rattled geopolitical markets.
While headlines were dramatic, the actual impact on energy markets has been limited so far:
- Venezuela currently produces under 1 million barrels of oil per day — about 1.1% of global supply.
- Brent oil prices rose only marginally when markets reopened.
- The real story is longer term: Venezuela holds around 18% of global oil reserves, meaning future policy changes could materially affect global supply and prices.
What this means for Australian households:
- Petrol prices are unlikely to spike immediately unless the situation worsens.
- Over time, increased Venezuelan production could actually place downward pressure on oil prices, which would be positive for fuel costs and inflation.
For now, markets are adopting a wait-and-see approach — and so should investors.
Interest Rates: Are Hikes Back on the Table?
The RBA held the cash rate at 3.60% in December, but the outlook has shifted.
Inflation rose to 3.8% in October, above the RBA’s 2–3% target band, forcing economists to rethink expectations.
Forecasts are now split:
- CBA and NAB: expect a 0.25% rate rise in February
- Westpac: expects rates to stay on hold through 2026
- RBA: has signalled that a hike is being considered, pending Q4 inflation data
What this means for mortgage holders:
- Monthly repayments will increase
- Household budgets will tighten
- Refinancing and loan structuring will become even more important
This makes 2026 a critical year for households to:
- Review cashflow
- Build buffers
- Consider fixed vs variable exposure
- Stress-test their budget
If you have a mortgage, now is the time to be proactive — not reactive.
Christmas Spending: A Surprising Show of Strength
Despite cost-of-living pressures, Australians spent big at Christmas:
- $72.4 billion spent in the six weeks to Christmas Eve — up 4% on 2024
- Total gift spending hit $12 billion
- Average spend per shopper: $757
Consumer confidence also jumped to 103.8 in November, its first reading above 100 since early 2022 — meaning more optimists than pessimists.
Boxing Day spending kept the momentum going, with $3.8 billion spent through to New Year.
Why this matters for the economy:
- Supports jobs
- Helps retail businesses
- Reduces recession risk
- Keeps economic momentum alive
However, it also feeds inflation — which is why the RBA is cautious about cutting rates too soon.
Australian Share Market: A Third Year of Gains
The ASX finished 2025 up 6.8%, marking three consecutive years of positive returns.
Key drivers:
- Mining stocks performed strongly due to high commodity prices
- Gold prices hovered around US$4,100 per ounce, supporting resource companies
- Banks delivered solid performance, boosting many super balances
What this means for super members:
Most Australians should have seen another year of positive super returns, despite volatility during the year.
Time in the market matters far more than timing the market.
Fuel Prices: A Small Win for Households
- Average price fell to $1.74 per litre
- Down from $1.87 in September
With stable global oil markets and a reasonably steady Australian dollar, prices may remain contained into early 2026 — assuming geopolitical tensions don’t escalate.
For families and commuters, this is welcome relief after years of elevated fuel costs.
Trump Tariffs and Global Trade Risks
- Average US tariffs reached ~17%, the highest since the Great Depression
- Tariffs are generating about $30 billion per month for the US Treasury
- However, they risk reigniting inflation and disrupting supply chains
What this means for Australia:
- Global trade uncertainty can dampen business investment
- Supply chain disruptions can increase costs
- Global growth could slow if tensions escalate
The US Supreme Court is currently reviewing the legality of Trump’s tariff powers, with a decision expected in early 2026.
That ruling could materially shift the global trade landscape.
US Dollar Weakness: What It Means for Australia
The US dollar had its weakest year since 2017, falling 9.4% against major currencies.
Why?
- Concerns about US government debt
- Uncertainty around Federal Reserve policy
- Expectations of future US rate cuts
Winners and losers:
Winners
- Australian exporters
- Australians travelling overseas
Risks
- If global tensions rise, the US dollar could rebound sharply as a “safe haven” asset.
Outlook for 2026: What Should Investors Do?
- Labour market remains resilient
- Wages are growing faster than inflation
- Household savings have improved
- Corporate earnings remain solid
But key uncertainties remain:
- Will the RBA hike rates in February?
- How will Venezuela’s situation evolve?
- Will global trade tensions worsen or ease?
Smart investing principles for 2026:
- Stay diversified
- Focus on quality assets
- Avoid emotional reactions to headlines
- Think long term, not month to month
- Review your financial plan regularly
Markets will be volatile — but long-term fundamentals remain sound.
If this raises questions about your situation, get in touch with your advisor to understand what it means for your plan.
