Quarterly economic update: April – June 2025

The second quarter of 2025 delivered plenty of headlines – some reassuring, others more concerning.

Interest rates dropped. House prices climbed. Inflation cooled. But then came a war in the Middle East, a tariff standoff between the US and Europe, and a fresh round of volatility across global markets.

Here’s what moved markets between April and June – and what could shape the months ahead.

Global conflict re-emerges

In mid-June, long-simmering tensions in the Middle East escalated into direct conflict between Israel and Iran.

Markets reacted quickly. Oil prices surged before easing, and the US dollar slumped to a three-year low as bond yields jumped. Analysts warn that if oil supply is disrupted, Australian economic growth could slow by around 0.2%.

The situation intensified after the US supported Israel in bombing key Iranian nuclear facilities, raising fears of further escalation.

US–Europe trade tensions flare

On April 2, President Trump introduced sweeping tariffs on imports from every country. He temporarily paused tariffs on European goods – but that hold is set to expire on August 1.

If a deal isn’t reached by then, tariffs as high as 50% could come into effect. In response, the European Commission has prepared countermeasures targeting €95 billion of US exports.

Investors are watching closely, as any escalation could have ripple effects across global supply chains and inflation.

Fuel and energy prices under pressure

The Middle East war pushed oil prices higher, causing Australian petrol prices to jump by 10–15 cents per litre almost immediately.

With oil being a key inflation driver, this spike has raised new concerns that the current dip in inflation could be short-lived. Pressure is also mounting on energy prices as the government’s temporary gas price cap is due to expire in July.

Interest rates: A local cut, global caution

The Reserve Bank of Australia (RBA) cut interest rates by 0.25% in May, bringing the cash rate down to 3.85%. This was widely expected after inflation moved back into the RBA’s target range.

In contrast, the US Federal Reserve left its rate unchanged at 4.5%, emphasising a “wait and see” approach and focusing on data before making further moves.

Crypto and precious metals steady

Bitcoin climbed toward US$99,000 by late June, helped by easing inflation and expectations of further rate cuts.

Gold remained stable around US$3,300 per ounce – a relatively calm response given global conflict, but notable after its strong run since late 2022.

Share markets rebound

Despite sharp volatility early in the quarter, Australia’s ASX 200 ended June up 1.3% from March. After a steep 10% drop in early April, the index surged more than 20% by quarter-end.

The US market saw a similar pattern, making Q2 its strongest quarter this year.

Property prices climb again

Australia’s housing market remained resilient. National house prices rose for the fifth month in a row in June, buoyed by the rate cut and limited housing supply.

Despite affordability challenges, strong demand continues to drive values upward.

Job market and consumer confidence

Unemployment stayed steady at 3.8% in May, with job vacancies still elevated.

Consumer sentiment ticked up in June, suggesting that households are cautiously optimistic – even as cost-of-living concerns persist.

What to watch next

As Q3 unfolds, there’s plenty for investors to keep an eye on:

• The next RBA and US Fed rate decisions
• The August 1 tariff deadline between the US and Europe
• Ongoing developments in the Middle East
• Company earnings reports, which often trigger market moves based on both results and outlooks

Markets are walking a tightrope between optimism and caution. Staying informed, diversified and focused on long-term goals remains key.