Thanks for reading our fourth Economy & Property Market Watch for 2026.
The RBA has held rates at 4.35% at its June meeting today, marking the first pause after three increases earlier in 2026. The Board indicated it is now positioned to wait and assess, with monetary policy seen as restrictive enough as the previous rate hikes take effect.
The case for holding firm through early June was due to April’s monthly CPI easing to 4.2% from March’s 4.6%, the 10-year bond yield retreating below 4.9%, and markets moving to price out any further tightening.
In effect, the tightening bias that defined the first half of the year has met softer data and a de-escalation in the Middle East. The tone across rates, property and currency markets has shifted accordingly.
"The Scorecard" is updated to reflect the available data as of June 2026. The 'Previous (May)' column reflects the starting position at the last edition.
Headline CPI fell to 4.2% in April from 4.6% in March, marking the first material step down in this cycle.
The relief came chiefly from fuel. As the worst-case Strait of Hormuz scenarios were priced out and diplomatic momentum built, the automotive-fuel spike seen in March began to unwind. Housing and transport costs are stickier components.
Trimmed mean inflation is tracking around 3.3%, still above the 2–3% band but no longer accelerating. April’s easing was enough to shift the Board’s posture from “tightening” to “watch and wait”. Economists will now be betting on an August move. The next monthly CPI data (due 24 June) will be the key input for the August meeting.
Looking to August
The RBA’s next meeting is on 11 August, with two questions to watch: 1) whether the fuel-driven spike has genuinely passed through without embedding expectations, and 2) whether the softening labour market is the start of a trend.
If May CPI confirms the April easing and unemployment continues to drift up, the case for a sustained hold or eventually a cut will strengthen. A re-escalation in the Gulf, and the oil price with it, is the obvious risk to that path.
Business confidence, which collapsed to multi-year lows during the March oil shock, has begun to stabilise as the geopolitical tail risk recedes. Conditions remain ok but subdued. Labour costs and softer consumer demand are the main constraints.
The divergence across sectors and states persists. Finance, business services and property continue to outperform retail, accommodation and food. Queensland and Western Australia lead, while Victoria continues to lag. Relief on input costs as oil retreats should support margins for the rest of 2026, provided the Middle East de-escalation holds.
The commercial picture is fundamentally unchanged in substance but improved in tone, as bond yields improve the funding-cost outlook. Industrial and prime logistics show income resilience, and well-located prime assets with quality tenants remain firmly sought.
Secondary offices with structural vacancies face ongoing repricing, and covenant strength is the key differentiator in retail. The easing in long yields, if sustained, is the first genuine tailwind for cap rates in this cycle.
National dwelling values were flat in May (0.0%) on Cotality’s index, a clear signal that the 2025–26 upswing has run its course.
The two largest markets, Sydney and Melbourne, are now in decline: Sydney fell 0.9% and Melbourne 0.8% over the month, leaving both capitals respectively 1% and 1.9% below their November 2025 highs. Perth and Darwin still lead, each up 1.5%, underscoring a multi-speed market.
The combined capitals rose just 1.6% over the quarter, the softest three-month reading since April 2025, and rental yields expanded nationally for the first time this cycle. The familiar drivers are stretched affordability, deteriorating serviceability, and three interest rate rises now biting. The median combined-capital dwelling is around $1.18m for houses and $766k for units.
Capital City Housing Performance in May 2026
| Location | Month | Quarter | Annual |
|
Adelaide
|
0.5% |
2.4% |
10.8% |
|
Brisbane
|
0.9% |
2.8% |
15.0% |
|
Melbourne
|
-0.8% |
-1.0% |
3.5% |
|
Sydney
|
-0.9% |
-0.7% |
5.5% |
|
Perth
|
1.5% |
4.4% |
21.0% |
|
All Capitals
|
-0.1% |
1.6% |
8.4% |
|
All Regionals
|
0.6% |
2.4% |
11.8% |
Source: Cotality Home Value Index, June 2026.
The Australian 10-year yield has fallen to around 4.78%, the lowest since March and down roughly 20 basis points over the month. A run of softer data and easing oil prices led investors to rule out another hike and scale back expectations for August.
The market now sees the cash rate peaking at 4.35%. It marks a notable reversal from the 5%-plus levels that defined March and May, and it eases some of the upward pressure on fixed-rate mortgage and business lending.
|
Country |
Cash Rate | 10 Year | Spread |
| Australia | 4.35% | 4.78% | 0.43% |
| Canada | 2.25% | 3.55% | 1.30% |
| India | 5.25% | 6.95% | 1.70% |
| Japan | 0.75% | 2.55% | 1.80% |
| New Zealand | 2.25% | 4.70% | 2.45% |
| UK | 3.75% | 4.95% | 1.20% |
| USA | 3.75% | 4.40% | 0.65% |
Australian equities have firmed alongside the global rally, with the All Ordinaries back near 8,900 as falling yields and the Middle East ceasefire have improved sentiment. Resources and energy have given back some gains as oil eases, while financials are mixed, with a lower-rate path tempering margins but improving the credit-quality outlook. The index is up around 7% over twelve months, still lagging the US and Japan but in a materially better tone than the March lows.
Global equity markets have recovered materially from the March selloff. The Dow Jones has bounced, supported by strong Q1 US corporate earnings, optimism about oil prices and AI investment underpinning GDP. The Nikkei has surged to past 60,500, recovering the ground lost in March and reaching new highs. FTSE and DAX have also recovered, though both remain below their February peaks. Not much in the way of risk is priced in.
Global markets have rallied strongly amid growing expectations of a US–Iran agreement. Oil has fallen back from its late-April peak near US$120, and equities have pushed the Nikkei to fresh records above 66,000, the Dow back to its highs, while European markets have posted their strongest sessions since May.
|
Country |
Index |
Approx. Value |
Trend |
|
|
Australia |
All Ords | 8,916 | Recovering | |
|
Germany |
DAX | 24,635 | Rebounding | |
|
Japan |
Nikkei | 66,020 | Record Run | |
|
UK |
FTSE |
10,304 | Firm | |
|
USA |
Dow Jones |
50,849 | At High |
The Australian dollar has slipped back to around US$0.70 from the four-year high near $0.72 reached in May. These movements are the mirror image of the rate story, as the market priced out further RBA tightening. Broader commodity prices are yo-yoing, and that will be a watch. For import-focused businesses, the dollar still offers meaningful relief on USD input costs. For exporters, the pullback from the highs is a modest reprieve from an unexpected competitive headwind.
2026 RBA Monetary Policy Announcements
Thank you for reading Market Watch. The next RBA cash rate announcements will be at 2:30pm on the following Tuesdays in 2026:
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Disclaimer: This Market Watch is prepared for general information purposes only and does not constitute financial advice. MCP Financial Services recommends you seek independent advice before making any financial decisions.