Australia coasting through volatile global backdrop: Analyst

Compared to other global regions, Australia’s economy seems to be faring “relatively well” against a particularly “difficult” global backdrop hampered by a variety of administrative and inflationary issues, according to analysis from Janus Henderson Investors.

Emma Lawson, the fund manager’s Fixed Interest Strategist in Macroeconomics, said the issues plaguing other regions such as the US, China, the UK and Europe have not yet reached our shores, and that if any impact was to be felt it would be muted by the cautious economic strategies already in place.

“Through the fundamental data, there are the early signs of a lifting in tariff related inflation, in the US, alongside a weakening labour market. These are a difficult set of data to navigate,” Lawson said.

“The Chinese economy remains stagnant, with policy maker “anti-involution” push acting to limit manufacturing expansion. Fiscal concerns are hampering the UK and Europe’s ability to support economic growth.

“Australia is navigating this difficult global backdrop relatively well. The RBA remain cautious, amid its easing. The labour market remains steady. One-offs and data timing mismatches have shown heightened inflation concerns, but these are anticipated to reverse in future releases.

“The monthly CPI stands at 2.8%yoy, and the unemployment rate at 4.2%. Both business and consumer confidence have risen from low levels, which should underpin an expected modest pickup in economic activity.”

This comes despite Australian bond markets proving “relatively contained” due to ongoing global volatility, particularly in the wake of some “big market moves” happening in the US.

“The Australian bond market, as measured by the Bloomberg AusBond Composite 0+ Yr Index, rose 0.33%. The Reserve Bank of Australia (RBA) lowered the cash rate to 3.60%, as was expected,” Lawson said.

“Three-month bank bills were down 11 basis points (bps), to 3.57% by month end. Six-month bank bill yields fell 12bps to 3.66%. Australia’s three-year government bond yields ended the month 2bps lower, at 3.40%, while 10-year government bond yields were 1bp higher at 4.27%.

“Markets are taking time to assess changes in the US Administration’s management of the US Federal Reserve, and the Bureau of Labour Statistics, after a member of the former was fired, and the head of the latter, replaced.

“Concerns regarding central bank independence and data quality are legitimate, but the implications long-term and there are still pathways to work out. A lack of significant market reaction shouldn’t be taken as a lack of importance.”

Lawson also confirmed Janus Henderson’s forecast for any cash rate movements remained relatively unchanged.

“There has been little change in market pricing over the month, with a low in the cash rate priced at 3.02% in July 2026. This remains close to our base case for the RBA to ease a further 75bps to 2.85%.

“Our low case reflects a weaker economic outcome and the RBA easing by a total of 250bps. We allocate a modest weight to the low case.

“We hold a small, long duration position to take advantage of some of the lift in yields, while we remain vigilant through the volatility to take advantage of two-way mispricing.”