Summary: 'Two Minutes for Zagga' | November 2025
October brought mixed signals for Australia’s economy — and a growing dilemma for the Reserve Bank.
The RBA held rates steady at its latest meeting, citing elevated inflation and a rising unemployment rate. With its dual mandate to support full employment and keep inflation near 2.5%, the central bank faces a tough choice: cut rates to support jobs, or hike to contain prices.
Spending slows, sentiment cautious
After a strong June quarter, household spending rose just 0.2% in real terms for September. Consumer sentiment remains subdued, with households continuing to spend cautiously — a trend that could weigh on growth heading into year-end.
Approvals rebound
Following two weak months, dwelling approvals jumped 26% in September, driven by apartment blocks. While volatile, this rebound suggests early signs of recovery in construction, supported by easing red tape and pro-growth policy shifts.
Labour market softens
Unemployment has edged up to 4.5%, with job ads falling to a fresh cyclical low. The RBA’s dilemma is increasingly tilted toward the employment side, though it remains cautious — signalling it wants to see sustained evidence of lower inflation before moving rates.
Outlook
For now, the economy is “muddling along” — not strong, but not failing. Inflation is elevated, unemployment is rising, and the RBA is likely to stay on hold until the new year. A lift in consumer spending and continued momentum in approvals will be key to rekindling growth.
Watch the full video below.
Stephen Koukoulas is Managing Director of Market Economics, having had 30 years as an economist in government, banking, financial markets and policy formulation. Stephen was Senior Economic Advisor to Prime Minister, Julia Gillard, worked in the Commonwealth Treasury and was the global head of economic research and strategy for TD Securities in London.
