Australian Economy Forecast 2026: Interest Rates, Inflation, Crypto, AI, Gold and Silver
The ASX 200 ended 2025 with a 6.8% return, closing the year at 8714.3 after reaching a record high on 21 October. Contrary to prior expectations of rate cuts, market outlooks for 2026 have shifted towards potential rate hikes. Two of the four major banks anticipate a Reserve Bank of Australia (RBA) rate increase in February, with no cuts predicted.
In comparison, US equities outperformed with double-digit returns, supported by a December rate cut and expectations for further reductions. Australia's market lagged, driven by a rally in resources and banking sectors. Despite ongoing geopolitical risks such as tensions between Beijing and Taiwan and the US's oil blockade of Venezuela, equities are expected to rise in 2026.
Concerns have been raised about an AI bubble, where capacity is exceeding supply. UBS acknowledges continued gains but warns of the risks associated with a bubble. Bitcoin and the broader cryptocurrency market are considered vulnerable to retesting 2025 lows amid regulatory and market volatility. Notably, Finder data indicates about one in four Australians under 30 have exposure to cryptocurrencies.
Precious metals have shown strong performance, with silver up over 150% and gold approximately 70% higher in US dollar terms in 2025. These are viewed as attractive safe-haven assets. Australia's gold deposits and silver production bolster potential upside. However, sharp increases in prices could hint at underlying macroeconomic troubles.
Overall, precious metals are expected to maintain their status through 2026, supported by ongoing demand. There is potential upside for parts of the Australian share market linked to metals, while uncertainty remains around inflation and interest rate trends.
