> **来源：[研报客](https://pc.yanbaoke.cn)** # Capacity constraints keep inflation elevated # ECONOMY REMAINS CONSTRAINED The ABS's January monthly CPI data came in slightly above expectations, annual headline inflation remained steady at $3.8\%$ but trimmed mean inflation rose to $3.4\%$ . Capacity utilisation - a leading indicator of inflation - remains above the long-term average indicating that the economy is supply constrained. Combined with a rise in aggregate demand following previous interest rate cuts, this has led to the recent rise in inflation. # INCREASED GOVERNMENT SPENDING Government spending as a share of the economy has steadily risen since 2015, accounting for $28.6\%$ of real GDP in Q4 2025. This reflects spending growth across all levels of government. Over the past three years, the biggest growth is in Commonwealth spending which has risen by $15.7\%$ ( $11.6b) while State and local government spending has grown by \(9.7\%$ (\)10 billion). This is contributing to inflation by crowding out the private sector, increasing demand for common resources. # REAL GDP GROWTH RISES IN Q4 Australia's economy grew by a stronger than expected $0.8\%$ in Q4 2025, increasing the real annual growth rate to $2.6\%$ . This reflected both higher household and private investment which are now the key drivers of GDP growth. Public demand also grew as all levels of Government increased both expenditure and investment. Although total growth was higher than the RBA's forecasts, private demand was weaker than expected. This may see the RBA hold rates in March and wait for the release of Q1 inflation figures. # Capacity constraints drive an uplift in inflation Capacity utilisation rate relative to long-run average (3-month moving average), headline inflation and trimmed mean inflation $(\%)$ Source: Knight Frank Research, NAB, Macrobond Note: COVID-19 period has been truncated. # All levels of government are increasing spending Government spending as a share of real GDP $(\%)$ Source: Knight Frank Research, ABS By government type Total # Private demand driving GDP growth Year-ended, % change with contributions Source: Knight Frank Research, ABS Notes: Data for Q2 2020 and Q2 2021 have been truncated. *Other includes changes in inventories and statistical discrepancies Australia key forecasts <table><tr><td></td><td>Real GDP growth (Q4 2025, y/y %)</td><td>Unemployment rate (January 2025, %)</td><td>Core CPI inflation (January 2025, y/y %)</td><td>Cash rate target (February 2025, %)</td><td>10-year bond yield (27 February 2026, %)</td></tr><tr><td>Latest</td><td>2.6</td><td>4.1</td><td>3.4</td><td>3.85</td><td>4.7</td></tr><tr><td>Year-end 2026* (f)</td><td>2.4</td><td>4.5</td><td>3.2</td><td>4.1</td><td>4.85</td></tr></table> # Business indicators Business conditions remain resilient despite expectation of more rate hikes PMIs are volatile recently Source: Knight Frank Research, Macrobond <table><tr><td rowspan="2"></td><td rowspan="2">Latest Feb-26</td><td colspan="3">Last quarter</td><td>1 year ago</td></tr><tr><td>Nov-25</td><td>Aug-25</td><td>May-25</td><td>Feb-25</td></tr><tr><td>Australia</td><td>52.4</td><td>52.6</td><td>55.5</td><td>50.5</td><td>50.6</td></tr><tr><td>China</td><td>51.6</td><td>51.2</td><td>51.9</td><td>49.6</td><td>51.5</td></tr><tr><td>Euro Area</td><td>51.9</td><td>52.8</td><td>51.0</td><td>50.2</td><td>50.2</td></tr><tr><td>Japan</td><td>53.9</td><td>52.0</td><td>52.0</td><td>50.2</td><td>52.0</td></tr><tr><td>UK</td><td>53.9</td><td>51.2</td><td>53.5</td><td>50.3</td><td>50.5</td></tr><tr><td>US</td><td>52.3</td><td>54.2</td><td>54.6</td><td>53.0</td><td>51.6</td></tr></table> \*Jan-26 Unemployment rate falls further Unemployment rate (trend adjusted) Source: Knight Frank Research, Macrobond <table><tr><td></td><td>Jan-26</td><td>Oct-25</td><td>Jul-25</td><td>Apr-25</td><td>Jan-25</td></tr><tr><td>Australia</td><td>4.1</td><td>4.3</td><td>4.3</td><td>4.1</td><td>4.0</td></tr><tr><td>NSW</td><td>4.0</td><td>4.1</td><td>4.2</td><td>4.0</td><td>3.9</td></tr><tr><td>Vic</td><td>4.5</td><td>4.7</td><td>4.6</td><td>4.4</td><td>4.5</td></tr><tr><td>Qld</td><td>4.2</td><td>4.2</td><td>4.1</td><td>4.0</td><td>3.9</td></tr><tr><td>WA</td><td>3.9</td><td>4.1</td><td>4.1</td><td>3.9</td><td>3.6</td></tr></table> Business conditions and confidence remain positive NAB survey, balance of positive and negative responses Source: Knight Frank Research, NAB, Macrobond Forward orders improve in January Forward orders index, balance of positive and negative Source: Knight Frank Research, NAB # Consumer indicators Household spending remains strong, but outlook for rate hikes weigh on confidence Household spending falls in December Annual growth in household spending by type (%) Source: Knight Frank Research, Macrobond <table><tr><td></td><td>Dec-25</td><td>Sep-25</td><td>Jun-25</td><td>Mar-25</td><td>Dec-24</td></tr><tr><td>Household spending, current prices (m/m)</td><td>-0.4</td><td>0.3</td><td>0.4</td><td>0.1</td><td>0.6</td></tr><tr><td>Household spending, current prices (y/y)</td><td>5.0</td><td>5.0</td><td>4.9</td><td>4.1</td><td>4.1</td></tr></table> Interest rate hikes weigh on consumer sentiment Confidence index, value above 100 signal optimism Source: Knight Frank Research, Macrobond Broad-based rise in household spending Annual growth in value of spending by category\* $(\%)$ Source: Knight Frank Research, Macrobond *Excludes Alcoholic beverages and tobacco Latest in Dec-25 <table><tr><td></td><td>m/m (%)</td><td>y/y (%)</td></tr><tr><td>Recreation & Culture</td><td>-0.5</td><td>7.8</td></tr><tr><td>Other</td><td>-0.9</td><td>7.3</td></tr><tr><td>Hotels, Cafes & Restaurants</td><td>0.5</td><td>6.8</td></tr><tr><td>Food</td><td>-0.4</td><td>6.4</td></tr><tr><td>Health</td><td>-1.3</td><td>5.9</td></tr><tr><td>Total</td><td>-0.4</td><td>5.0</td></tr><tr><td>Household Goods</td><td>-1.7</td><td>4.4</td></tr><tr><td>Transport</td><td>0.6</td><td>3.6</td></tr><tr><td>Clothing & Footwear</td><td>-2.4</td><td>3.2</td></tr><tr><td>Alcohol & Tobacco</td><td>2.0</td><td>-13.5</td></tr></table> WA and QLD drive household spending Annual growth in value of spending by state $(\%)$ Source: Knight Frank Research, Macrobond # Inflation & interest rates # RBA expected to hold interest rates steady in March Inflation remains above the RBA target Annual growth headline and trimmed mean inflation (y/y %) Note: Data transitions from quarterly to monthly in April 2025. <table><tr><td></td><td>Jan-26</td><td>Oct-25</td><td>Jul-25</td><td>Apr-25</td></tr><tr><td>Headline CPI (m/m, %)</td><td>0.5</td><td>0.4</td><td>0.9</td><td>0.3</td></tr><tr><td>Headline CPI (y/y, %)</td><td>3.8</td><td>3.9</td><td>3.0</td><td>2.1</td></tr><tr><td>Trimmed mean inflation (y/y, %)</td><td>3.4</td><td>3.3</td><td>3.1</td><td>3.2</td></tr></table> Global inflation remains in check Headline CPI (y/y, %) <table><tr><td></td><td>Jan-26</td><td>Oct-25</td><td>Jul-25</td><td>Apr-25</td><td>Jan-25</td></tr><tr><td>Australia (y/y, %)</td><td>3.8</td><td>3.9</td><td>3.0</td><td>2.1</td><td></td></tr><tr><td>US (y/y, %)</td><td>2.4</td><td>2.1</td><td>2.7</td><td>2.3</td><td>3.0</td></tr><tr><td>UK (y/y, %)</td><td>3.0</td><td>3.6</td><td>3.9</td><td>3.5</td><td>3.0</td></tr><tr><td>Euro area (y/y, %)</td><td>2.0*</td><td>2.1</td><td>2.0</td><td>2.2</td><td>2.5</td></tr></table> *Dec-25 RBA expected to raise rates in May Historic rates and indicative RBA outlook $(\%)$ Source: Knight Frank Research, NAB, Oxford Economics, ASX Yields remain steady in February Yield by swap/bond duration $(\%)$ Source: Knight Frank Research, Macrobond <table><tr><td></td><td>Feb-26</td><td>May-26</td><td>Aug-26</td><td>Nov-26</td><td>Feb-27</td></tr><tr><td>Cash rate target</td><td>3.85</td><td></td><td></td><td></td><td></td></tr><tr><td>Oxford Economics</td><td></td><td>4.10</td><td>4.10</td><td>4.10</td><td>4.10</td></tr><tr><td>NAB</td><td></td><td>4.10</td><td>4.10</td><td>4.10</td><td>4.10</td></tr><tr><td>Market pricing</td><td></td><td>4.09</td><td>4.22</td><td>4.31</td><td>4.31</td></tr></table> Month-end <table><tr><td></td><td>Feb-26</td><td>Nov-25</td><td>Aug-25</td><td>May-25</td><td>Feb-25</td></tr><tr><td>2-year swap</td><td>4.47</td><td>3.90</td><td>3.53</td><td>3.57</td><td>3.81</td></tr><tr><td>5-year swap</td><td>4.60</td><td>4.10</td><td>3.72</td><td>3.75</td><td>4.11</td></tr><tr><td>10-year bond</td><td>4.78</td><td>4.42</td><td>4.27</td><td>4.33</td><td>4.43</td></tr></table> Monthly average # Financial markets Global financial markets weighed down by uncertainty around both tech and Iran attacks Tech and Iran strike weigh on equities Global equities, price indices, 1 Jan 2024 = 100 Source: Knight Frank Research, Macrobond Iran strike drives spike in oil prices Brent crude $\$ 1\mathrm{US} / \mathrm{b}$ (LHS), Shipping rates - Baltic Exchange Dry Index (RHS) Source: Knight Frank Research, Macrobond Percentage change from <table><tr><td></td><td>Nov-25</td><td>Aug-25</td><td>May-25</td><td>Feb-25</td></tr><tr><td>ASX 200</td><td>3.5</td><td>1.0</td><td>8.2</td><td>6.8</td></tr><tr><td>S&P 500</td><td>2.2</td><td>7.5</td><td>18.6</td><td>14.0</td></tr><tr><td>Nasdaq</td><td>-0.7</td><td>7.0</td><td>22.7</td><td>16.9</td></tr><tr><td>Euro STOXX 50</td><td>8.0</td><td>12.1</td><td>13.9</td><td>15.7</td></tr><tr><td>FTSE 350</td><td>8.6</td><td>13.8</td><td>20.7</td><td>20.1</td></tr></table> Monthly average Gold price rises, surpassing US$5,000 US$ Source: Knight Frank Research, Macrobond Percentage change from <table><tr><td></td><td>Jan-26</td><td>Oct-25</td><td>Jul-25</td><td>Apr-25</td><td>Jan-25</td></tr><tr><td>Gold (US/t oz)</td><td>4,892</td><td>22.2</td><td>48.7</td><td>48.7</td><td>74.7</td></tr><tr><td>LNG (US$/MMBtu)</td><td>10.4</td><td>-3.8</td><td>-14.9</td><td>-9.8</td><td>-26.1</td></tr><tr><td>Iron Ore (US$/t)</td><td>107.4</td><td>0.5</td><td>6.2</td><td>6.5</td><td>3.5</td></tr></table> Monthly average AUD retains strength in February AUD vs USD (LHS) and trade-weighted index (RHS) Source: Knight Frank Research, Macrobond <table><tr><td rowspan="2"></td><td colspan="5">Latest</td></tr><tr><td>Feb-26</td><td>Nov-25</td><td>Aug-25</td><td>May-25</td><td>Feb-25</td></tr><tr><td>USD per AUD</td><td>0.71</td><td>0.65</td><td>0.65</td><td>0.64</td><td>0.63</td></tr><tr><td colspan="6">Percentage change from</td></tr><tr><td>Trade weighted index</td><td>65.0</td><td>6.5</td><td>8.0</td><td>8.6</td><td>8.0</td></tr></table> Monthly average Recent research We like questions, if you've got one about our research, or would like some property advice, we would like to hear from you. You can also subscribe to our research. Alistair Read Senior Economist +61450831899 Alistair.Read@au.knightfrank.com Ben Burston Chief Economist +61290366756 Ben.Burston@au.knightfrank.com