Quarterly economic update: April - June2025
Key Highlights from 2024–25
Over the course of the financial year, global share markets delivered robust returns, driven by falling inflation, central bank rate cuts, and surprising economic resilience despite geopolitical tensions and trade disruptions.
Australian shares gained 13.7% over the year, buoyed by lower interest rates and positive global momentum. Sectors such as technology, financials, and property led the charge. Bonds and fixed income assets provided solid returns as bond yields declined on rate cut expectations. Property markets stabilised, with listed property securities performing strongly amidst declining interest rates, while cash delivered higher returns than recent years, thanks to earlier rate hikes.
Market Themes Driving Returns
Resilient Economic Growth: Global economies outperformed pessimistic forecasts. Despite tariff battles and conflict in the Middle East, recession was avoided, and key markets such as the US, Europe, and China reported steady growth.
Interest Rate Cuts & Cooling Inflation: Inflation continued to ease across major economies, allowing central banks—including the US Federal Reserve and Reserve Bank of Australia (RBA)—to begin or signal rate cuts. In Australia, inflation fell to just 2.1% by May, boosting expectations for further RBA rate reductions.
Artificial Intelligence Boom: AI remained a significant driver of equity markets, particularly in the US, where tech giants led index gains.
Geopolitical Tensions: Markets briefly wavered in response to US military action in Iran, the war in Ukraine, and heightened trade tensions under President Trump’s tariff agenda. However, volatility was often short-lived, with markets recovering on signs of negotiation progress or policy pivots.
Australian Economic Snapshot: Australia’s economy presented mixed signals. While job growth remained strong and inflation declined, retail spending and housing activity were subdued under cost-of-living pressures. Nevertheless, equities and property sectors were buoyed by rate cuts and improved investor sentiment.
Quarterly Review: April to June 2025
Global Shares: Shares surged in June following a “90-day pause” in US tariffs and optimism over interest rate cuts. US markets hit new highs, supported by tech sector strength and AI enthusiasm.
Australian Shares: The ASX 200 posted strong quarterly gains, especially in IT (+26.9%) and financials (+15.7%), as the RBA cut rates and inflation moderated.
Fixed Income: Bonds rallied amid growing confidence in further rate cuts, with Australian bonds returning 2.6% for the quarter.
The outlook and implications for investors
While returns over the past three years have been strong, markets are likely to remain volatile for the following reasons:
Tariff and Trade Risks: US trade policy remains unpredictable, with tariffs potentially flaring up again after the July deadline.
Debt & Deficits: High US government debt and fiscal risks could challenge markets.
Geopolitics: Risks remain from ongoing wars and potential further Middle East disruptions.
Market Valuations: Share valuations, particularly in the US, are elevated, raising the possibility of corrections.
However, supportive factors such as lower interest rates, steady economic growth, and continuing tech innovation suggest a more moderate but positive investment environment ahead.
As always, investors should stay focused on long-term goals rather than reacting to short-term market moves. Maintain a diversified portfolio across asset classes and geographies, and remember that market corrections are normal, and downturns often create future opportunities.
| Asset Class Summary – 30 June 2025 | 1 Year % Total Return |
|---|---|
| Australian Shares | 13.7 |
| Global Shares (hedged) | 13.3 |
| Global Shares (unhedged) | 18.4 |
| Australian Property Securities | 13.8 |
| Australian Bonds | 6.8 |
| Global Bonds (hedged) | 5.4 |
| Cash | 4.4 |
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