A Soft Landing for Australia: Key Highlights from the 2025 Year in Review

Many investors breathed a sigh of relief at having survived (and even thrived) the turbulent economic and political events of 2025.

Super funds posted strong double-digit returns for the 2024 - 2025 financial year. Australia recorded modest economic growth, while inflation cooled a little throughout the year - albeit with a slight uptick at year’s end - and house prices surged before hitting the brakes in December. Share markets reported respectable gains locally and some surging profits globally.

The big picture

Markets and economies around the world have danced to the tune of the Trump Administration’s second term in office and reacted to wars and unrest in the Middle East and Ukraine.

The US President’s often surprising policy twists and turns, particularly a punishing new tariff regime, saw markets falter, and exporters of goods and services to the US plunged into uncertainty.

The Australian dollar reflected the choppy conditions, hitting lows just under 0.60 USD in April before recovering slightly by year-end at just under 0.67 USD. This was buoyed by our strong iron ore exports and the growing demand for lithium, copper and rare earths.

The artificial intelligence revolution was another feature of the year, driving US share markets ever higher, with some fearing the bubble is overdue to burst.

Economy

Inflation’s stubborn resistance to the Reserve Bank’s measures to bring it down could lead to further interest rate rises in 2026.

The Consumer Price Index in January recorded an annual rate of 3.4%, down 0.4% on the previous month. The RBA’s flexible inflation target aims to keep the cost of living increases between two and three per cent.

The cash rate began 2025 at 4.35%, but after three cuts during the year, it was down to 3.6% in December. The RBA is due to meet in February to consider its next move.

In the US, the Federal Reserve also cut rates three times, putting the interest rate in a range of 3.5 - 3.75%.

The Australian economy grew 2.1% in the year to September, in a massive improvement on the previous year’s growth of 0.8%.

Property

After two uneven years, home values surged again in 2025 by 8.6%, adding about $71,500 to the national median.

It’s the strongest calendar year performance since the remarkable 24.5% increase in 2021.

However, values softened in December, recording the smallest monthly increase in five months.

Darwin delivered the best performance with an 18.9% gain in values during the year, while Melbourne took the wooden spoon with a 4.8% increase.

Share markets

Global equity markets proved that they could thrive, even in a higher-interest-rate environment, and the AI revolution moved from the hype phase of the previous year to serious players in 2025.

While ‘The Magnificent Seven’ tech stocks have long ruled the S&P 500, in 2025, just two outperformed the index with a gain of 64.8% for Alphabet and 38.9% for Nvidia.

It was a slower pace for Australian markets with the S&P/ASX 200 delivering a solid total return of 6.8%. While the big banks faced some pressure on margins as interest rates peaked, the materials sector was supported by the global energy transition. Dividend yields remained attractive, continuing Australia’s tradition of providing reliable income for retirees and SMSFs.

Commodities

Precious metals drove commodity values in the past year, with investors looking for security amid interest rate movements and geopolitical tensions.

Silver was up by an astonishing 182% during the year, but a sell-off in December saw the price finish the year with a 147 gain.

Meanwhile, gold’s safe-haven status during times of uncertainty saw it jump by 65% during the year.

Looking ahead

It seems likely the issues that dominated the financial markets in 2025 may continue to shape performance and returns this year.

Global politics and war are likely to move commodity prices and equity markets, while the contrariness of US foreign policy will both spook and buoy investors.

In Australia, all eyes will be on the RBA, with high levels of speculation as to where interest rates will be heading in 2026.

Important information – Oracle Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.