Economic Update - November 2025

November brought some resolution but not much extra clarity on last month’s headlines. The US government shutdown ended with a whimper. Data is again flowing from US agencies, but not yet enough to fill in the gaps created by the shutdown. Some AI stocks tumbled while others rose. And like a pouty tween, inflation regained the RBA’s attention, without communicating enough to let us know what to do about it.

What happened in Australia?

After the September quarter inflation result came in stronger than expected at the end of October, the RBA unsurprisingly kept the cash rate on hold in November.

At the Monetary Policy Press Conference, RBA Governor Michele Bullock explained the Board believed that after three rate cuts, monetary policy was still slightly restrictive, but admitted that the Board is not completely certain; the cash rate could be neutral or slightly expansionary. This sentiment was echoed in the Board minutes and in subsequent speeches by senior RBA management during the month.

“On balance, members judged that financial conditions were still slightly restrictive but that it was also possible this was no longer the case.” RBA Monetary Policy Board Minutes, 2 November meeting.

So when the October labour data showed a decrease in unemployment, from 4.5% to 4.3%, and the September quarter Wage Price Index came in flat, the market wondered that maybe the economy was closer to an expansionary stance rather than a restrictive stance. As a result, market expectations for a 25 bps rate cut in December fell sharply (see chart below).

Source: ASX RBA Rate Tracker

And when the new monthly CPI series showed inflation rising above expectations, from 3.6% in September to 3.8% in October (see chart below), the market didn’t blink. Some are now even pricing in the next RBA move as a rise rather than a cut. 

Adding weight to the idea that the cash rate could be expansionary was a 12.8% increase in consumer sentiment in November, leading to the first positive reading in sentiment (above 50) since early 2022 (see chart below).

On the political front, the Labour government committed more funds to help the struggling Australian metal manufacturing industry while the Liberal-National opposition decided to ditch their net-zero 2050 target.  The opposition lost so much ground in the May election that they have nothing to lose and are hoping to capitalise on the changing attitudes to climate change among some advanced economies.

What happened around the world?

USA

The US government shutdown finally ended after a record-breaking 43 days when a handful of Democrats caved. The US government is now fully funded until … January 30!

With the shutdown resolved, federal data agencies got back to work, but will need time to get back up to speed.

The BLS released the September jobs report on November 20: two months late. While non-farm payroll increased by a better than expected 119k jobs, unemployment increased slightly to 4.4% with the total number of unemployed increasing by 219k. Meanwhile, Challenger,Gray and Christmas showed‌ 153k announced job cuts for October, a 175% increase over the year (see chart below).

The November Beige Book supported the idea of a slowing labour market. It also confirmed the trend of slowing consumer spending (except by the super-rich). Meanwhile, November consumer confidence fell sharply (see chart below).

As for inflation, the Cleveland Fed’s inflation nowcasting shows PCE only rising slightly from 2.71% in October to 2.81% in November over the year.

Minutes from the Federal Reserve Meeting in October revealed unusual levels of debate over the October decision and over what to do in December. Is inflation still the chief enemy, or is slowing employment a more urgent concern? The lack of data during the government shutdown didn’t help.

The market, however, is still certain that there will be a 25 bps rate cut in December, and the latest data, which leans towards labour market weakness over higher inflation, has only strengthened their belief (see chart below).

Source: CME FedWatch Tool

Nvidia became the first company to hit a USD 5 trillion valuation in late October on optimism that it would regain access to China. But AI-bubble jitters saw Nvidia and other AI-associated stocks tumble in early November. Nvidia’s estimate-beating Q3 results provided some calm but it was not enough to stop later profit taking by nervous investors. Alphabet was the major exception, with rave reviews of Gemini 3 leading to a surge in its share price. Even Berkshire Hathaway tipped in USD 4.93 billion into Alphabet.

Bitcoin continued its fall from October, falling below 90k USD. Does this reflect the general diminished appetite for risk, a slightly strengthening USD, or a realisation that Bitcoin is too correlated with stocks? Probably all three.

China

Chinese exports decreased for the first time since President Trump’s Liberation Day tariffs (see chart below). 

Elsewhere, while senior officials finalised the next five-year plan, the Chinese economy continued its gloomy slide. Retail spending declined for the fifth straight month (see chart below) and manufacturing PMI remained contractionary, falling from 49.8 in September to 49 in October.

Source: National Bureau of Statistics of China

EU

Inflation decreased from 2.2% in September to 2.1% in October (see chart below). The European Commission’s Autumn forecast has inflation falling to 1.9% in the euro area in 2026 and GDP at 1.4% in 2025 and 2026.

All this stability has the ECB Central Bank President Christine Lagarde thinking about legacy again. During November, she called for greater integration to enable the EU to compete with the US and China.

“If we make our Single Market truly single, Europe’s growth will no longer depend on the decisions of others, but on our own choices,” Christine Lagarde. 

Japan

Japan will reopen the world’s largest nuclear power station as it looks to meet its net-zero targets. The Kashiwazaki Kariwa station was closed after the Fukushima nuclear disaster.

But that was not the only thing that was reopened during the month, and I’m talking about PM Sanae Takaichi’s comments on Taiwan. In keeping with her devotion to Abenomics (and to the consternation of the IMF), Takaichi approved a USD 117 billion supplementary budget, the largest since the pandemic. 60% of the deficit will be funded through debt. Japanese yields rose on the news.

Takaichi was always going to unleash new stimulus but would have been emboldened by September quarter GDP showing Japan’s first contraction in one-and-a-half years (see chart below). The 1.8% annualised decrease was better than the expected 2.5%, but still comes as a blow to Japanese hopes.

UK

Given the UK is balancing low growth with rising debt, the bond market waited with trepidation for Rachel Reeves, Chancellor of the Exchequer, to hand down the UK budget. Surely it wouldn’t be a Truss 2022 re-run! Crisis averted! While spending is increasing, so will taxes, just not straight away!

“Rachel Reeves has succeeded in leading skittish UK bond markets to a safe place. Love or hate the politics of the Budget she delivered this week, it is churlish not to give her credit for that.” Katie Martin, Financial Times.

The BoE Monetary Policy meeting in November was more contentious. Five members of the committee voted to leave rates unchanged while four members voted for a 25 bps cut. Subsequent data released during the month did little to clarify the way forward. While inflation decreased slightly from 3.8% in September to 3.6% in October, September quarter GDP decreased 0.1% compared to the previous quarter and unemployment increased to 5% in the quarter (see chart below).

New Zealand

After cutting the cash rate by 50 bps at the start of October, the RBNZ cut the rate by another 25 bps at the end of November. The New Zealand economy is still struggling and is not expected to recover until the second-half of next year (see chart below).

Source: RBNZ

What this means for Australian Private Debt

The Australian economy is performing stronger than anticipated and has the RBA even more cautious with its next move. The next move may even be up. Australia remains a rude picture of economic health and opportunity for the private debt investor.