The big themes of 2026

Last year was dominated by interest-rate speculation. Structural policy – such as Australia’s productivity and China’s involution – are the new year’s big themes.

The Australian economy finished 2025 in a different state than many expected. Gross domestic product growth picked up; that was no surprise. But over the year the public sector share was larger, inflation surprised on the upside and the interest-rate easing cycle appeared to come to an end.

Australia’s fundamentals remain solid - the national balance sheet is strong, commodity prices are at high levels, and the labour market has only weakened modestly. As many have noted, productivity remains the key to realising higher economic growth while managing inflation levels. Distributional issues, such as housing, are likely to remain a policy focus in 2026.

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The global context has been more supportive than many could have hoped. The global economy grew 3.3 per cent in 2025, the same rate as 2024. Another solid year is in prospect for 2026. 

Despite its structural challenges, China again posted growth of 5 per cent; quite a remarkable outcome given its export reliance. Excessive investment and commensurately low pricing power is likely to be a sustained policy challenge.

Tariffs continued to play a role in 2025, although the lion’s share of the impact of tariffs has been to shift trade and production between economies, rather than to meaningfully reduce either. A similar outcome is likely in 2026.

Strong private-sector balance sheets, in most markets, provide a firm foundation. The artificial-intelligence (AI) boom has positively impacted investment in many markets, including the US and Australia, and boosted trade.

Outside China, electronic exports accounted for all the growth in Asian exports in 2025. The path of this boom offers scope for volatility in 2026. Will we see another year of exponential funding, investment and AI expectations? A correction at some point would seem likely.

In New Zealand, sentiment has been unusually sombre. One of the most aggressive easing cycles has been slow to generate improvement in the economic data.  But leading indicators have improved. Business confidence is the strongest in 11 years, tourist arrivals are only a fraction below pre-pandemic norms, and residential building consents the strongest since 2023.

There are even some early signs that NZ migration trends might be starting to improve. 2026 is sure to be materially stronger.

Richard Yetsenga is Chief Economist and Head of Research at ANZ Institutional