Quarterly Economic Outlook – November 2025
Michael Knox, Morgans Chief Economist, shares his latest quarterly outlook on global growth, inflation, commodities, and interest rates. Here are the key takeaways for November 2025.
Global Growth Outlook
Growth is slowing but stabilising across major economies:
- US: Eases to 1.8% in 2025 (including effects of US shutdown), recovering to 2.2% in 2026.
- Euro Area: Improves to 1.2% in 2025.
- China: Slows to 4.8%.
- India: Strong at 6.6%.
- Australia: Firms to 1.9%, inflation at 3.5%.
Australia: Inflation & Employment
- Retail electricity prices are rising as subsidies end, adding pressure to inflation.
- Employment growth is soft at 1.5%, below the median of 2.17%.
- Unemployment near 4% suggests inflation around 3.4%, above the RBA target.
Interest Rates & Monetary Policy
- RBA cash rate expected to rise to 4.1%, driven by higher core inflation.
- In the US, below-trend growth signals potential Fed Funds rate cuts ahead.
Commodities Snapshot
- Iron Ore: Slightly above fair value at US$100.80.
- Copper: Significantly overvalued at US$10,225 per tonne.
- Nickel & Zinc: Moderately undervalued.
- Gold: At record highs (US$4,013 per ounce) with limited upside.
- Soft Commodities: Wheat and cotton remain undervalued, presenting potential buying opportunities.
Equities Outlook
- S&P500: Model suggests fair value above current levels, but earnings expected to ease in Q4.
- ASX200: Trading well above model estimates, indicating strong sentiment.
Currency & Bonds
- AUD/USD: Model estimate at US70.94 cents, above current level of US65.48 cents.
- US and German bonds appear moderately overvalued, reflecting strong foreign buying.
Closing Thoughts
Global growth is slowing, but commodity markets and equities show mixed signals. Inflation pressures in Australia suggest further rate hikes, while US policy may ease. Investors should watch undervalued opportunities in soft commodities and monitor interest rate trends closely.
FAQs
1. What is the outlook for global economic growth in 2025?
Global growth is slowing but stabilising. The US is expected to grow at 1.8%, the Euro Area at 1.2%, China at 4.8%, India at 6.6%, and Australia at 1.9%.
2. Why is Australian inflation expected to remain high?
Inflation pressures are driven by rising retail electricity prices as subsidies end, combined with relatively strong demand and employment trends.
3. Will the Reserve Bank of Australia raise interest rates?
Yes, the RBA cash rate is forecast to rise to around 4.1% in response to higher core inflation.
4. Which commodities are currently undervalued?
Soft commodities like wheat and cotton are significantly undervalued, while iron ore is near fair value and copper remains overvalued.
5. How are equity markets positioned heading into 2026?
The S&P500 is trading below model estimates, suggesting potential upside, while the ASX200 is above fair value, reflecting strong investor sentiment.
DISCLAIMER: Information is of a general nature only. Before making any financial decisions, you should consult with an experienced professional to obtain advice specific to your circumstances.
