What’s going on here?
Westpac’s latest outlook points to a shifting global mood: as tensions between the US and China cool, major economies are zeroing in on their own economic headaches and policy changes.
What does this mean?
Westpac’s November 7 report signals a new chapter in the global financial story. The recent thaw in US-China relations eased pressure on bond yields and stabilized the US dollar, calming financial markets after a turbulent stretch. But as geopolitical risks faded, local economic issues have come to the forefront. The US is juggling stubborn inflation and fiscal uncertainty, with job market risks lurking on the horizon. China, meanwhile, is still searching for ways to boost its consumer sector, and Europe’s growth remains sluggish after last year’s inflation surge. Central banks are responding with different tactics—Australia’s central bank paused rate hikes and isn’t planning cuts until at least mid-2026, while the US is keeping rates higher to protect a strong dollar. In Australia, the transition from government-driven to private spending could challenge growth, and across the Tasman, New Zealand is banking on export strength and tighter policy to help fuel its own rebound next year.
Why should I care?
For markets: Stability returns but risks remain close to home.
Markets have settled as US-China tensions eased, with steadier bond yields and a firm US dollar giving investors a breather. Even so, concerns are shifting toward persistent inflation, shifting fiscal priorities, and softer economic growth, setting the stage for more volatility ahead. How central banks—from the RBA’s pause to the Federal Reserve’s cautious tightening—manage the next steps will heavily influence global currency moves and how investors balance their portfolios.
The bigger picture: From global crises to local crossroads.
Focus is moving from global showdowns to local economic fixes. Whether that’s the US wrestling with inflation and budget battles, China trying to get consumers spending again, or Europe seeking renewed momentum, domestic policymaking is in the hot seat. For investors and governments alike, success now hinges less on international politics and more on how each country navigates these homegrown economic turning points.
