Quarterly economic update: April to June 2026

It was a quarter of two halves. Overseas, the US and Iran agreed to end their war. Oil prices tumbled and sharemarkets rallied. At home, households copped another rate rise before the RBA hit pause. The Federal Budget also rewrote the rules for property investors.

Peace in the Middle East, Oil Falls and Markets Rally

After more than three months of conflict, the US and Iran agreed on 14 June to end the fighting. They also agreed to reopen the Strait of Hormuz, which normally carries about one fifth of the world’s oil. Prices had already been easing as hopes of a deal grew. Brent crude fell to around US$83 a barrel, down from its March peak of US$126. By late June, US crude was below US$70 as ships began moving again. That’s a big relief for motorists, and for inflation.

Sharemarkets jumped, with the Dow and Japan’s Nikkei both closing at record highs. Petrol prices will take longer to fall though, as shipping returns to normal.

Interest Rates, Borrowers Starting to Feel the Pain

The RBA raised the cash rate to 4.35% in May. It was the third rise in a row, following higher than expected March quarter inflation of 4.6%. Together, the three rises have added roughly $225 a month to repayments on a typical $500,000 mortgage.

June brought some relief. The Board kept rates on hold to see how the earlier rises and the oil shock play out. With the war over and fuel prices falling, there’s a reasonable chance the rises are done. Still, the RBA hasn’t ruled out another move.

Big Changes for Property Investors

The 12 May Federal Budget delivered the biggest change to property investment taxes in a generation. It’s already law. From 1 July 2027, negative gearing will only be available on new builds. If you buy an established investment property after 12 May 2026, you can no longer claim rental losses against your salary. You can only claim them against the rental income or future property gains.

If you already owned a property (or had one under contract) before Budget night, nothing changes. You fall under the old rules until you sell. The government will also replace the 50% capital gains tax discount with inflation indexation and a minimum 30% tax. This only applies to gains made after 1 July 2027. If you bought before 1985, you’ll also pay tax on any growth after 1 July 2027. Luckily, the family home isn’t affected. Gains on it remain tax free.

So what happens now? New builds suddenly look far more attractive, since they keep both negative gearing and the 50% CGT discount. Established properties lose some of their shine as investments in personal names. Existing owners also keep their benefits until they sell, so many may hold on longer. That could mean fewer properties coming up for sale. If you own an investment property, or plan to buy one, it’s worth revisiting your strategy with your adviser.

Gold Comes Back to Earth

After an incredible run, gold fell sharply. It dropped from a January peak of US$5,589 to below US$4,000 by late June, its lowest point since November 2025. Profit-taking likely drove the fall, along with investors rotating toward safer income returns from rising bond yields. A stronger US dollar, the end of the war and talk of US rate rises all played a part.

The US Dollar Bounces Back

After its worst year since 2017, the US dollar staged a strong comeback. It hit a one year high in late June as markets priced in possible US rate rises. New Fed chair Kevin Warsh recently hinted that rates could rise if inflation trends higher. That sentiment pushed the Aussie dollar below 70 cents. That’s good for exporters, less so for overseas holidays.

Looking Ahead

Despite everything last quarter, the ASX 200 managed to close the financial year up around 3.5%, near 8,800 points.

The big questions now are whether the peace deal holds, whether cheaper oil brings inflation down, and whether the RBA has finished raising rates. For investors, the message remains the same. Stay diversified, focus on quality assets and avoid reacting to headlines. If this quarter showed us anything, it’s how quickly things can change.