In the second quarter of 2025, Australia reported a 3.0% quarterly rise in construction work done. This exceeded the expected increase of 0.8% and marked the best rise since the first quarter of 2023.<\/p>\n
The construction work data encompasses residential and non-residential building work, as well as engineering work. Prior data had shown no growth, making this quarter’s performance notable.<\/p>\n
Simultaneously, attention was drawn to the Australian monthly Consumer Price Index. In July 2025, the CPI rose by 2.8% year-on-year, surpassing the expected 2.3% increase.<\/p>\n
The CPI figures are a key area of focus, indicating hotter-than-anticipated inflation in the country. This data helps inform economic projections and potential policy adjustments.<\/p>\n
The unexpected jump in July’s inflation to 2.8% year-on-year is the key data point we are focused on. This significantly overshot expectations and pushes inflation back towards the top of the Reserve Bank’s target band. Consequently, we see the RBA’s previous wait-and-see stance as no longer viable.<\/p>\n
The strong Q2 construction figures, showing a 3.0% rise, reinforce this hawkish view. This is the best growth we’ve seen since the first quarter of 2023, suggesting the economy has more underlying strength than anticipated. This gives the central bank cover to raise interest rates without fearing an immediate economic downturn.<\/p>\n
We should adjust interest rate positions to price in a higher probability of a rate hike at the September meeting. With the cash rate currently at 4.35%, the market has moved quickly to reflect this new reality. Overnight Index Swaps now imply a greater than 75% chance of a 25-basis-point increase, a dramatic shift from the 20% chance priced in yesterday.<\/p>\n
This shift in rate expectations is bullish for the Australian dollar, as higher yields attract foreign capital. The currency has already surged past 0.6750 against the U.S. dollar on the back of this news. We see opportunities in using options to position for further AUD strength against currencies with more dovish central banks.<\/p>\n
For equity markets, we anticipate headwinds as borrowing costs are now expected to rise further. This echoes the challenges faced by the ASX 200 during the aggressive hiking cycle that ended back in 2024. We should consider buying put options to hedge portfolios against a potential market dip in the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Australia’s construction surged 3.0% in Q2 2025; CPI rose 2.8%, indicating rising inflation pressures.<\/p>\n","protected":false},"author":62,"featured_media":16962,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-29679","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t