Rates Are Holding – But Opportunity isn’t
17/11/2025
Australia’s economy is delivering a mixed bag of signals right now, and it is reshaping the conversation around when the Reserve Bank might finally ease policy. Instead of a clear direction, we are getting a strange blend of strength, strain and shifting momentum across different parts of the economy. We see these contradictions every day through broker scenarios, borrower behaviour and funding patterns, and they tell a more layered story than the headline numbers suggest.
A Workers’ Market That Is Keeping the RBA on Guard
The latest unemployment figures dropped again and that alone changes the dynamic. A labour market holding firm sends a message that the economy still has heat in it, even if households feel stretched. From a policy point of view, this kind of resilience gives the RBA fewer reasons to move early on rate cuts, because strong employment typically keeps inflation sticky for longer.
Major banks have already shifted their expectations, with some pushing back the timing of any easing well into 2026. In our conversations with brokers, we are seeing borrowers remain surprisingly stable in terms of repayment performance, which supports the view that the jobs market is doing more heavy lifting than many predicted.
Outside of Jobs, the Engine Is Running Rough
Move away from employment and the picture changes quickly. Retail activity is soft, businesses are reporting weaker trading conditions, and credit stress is rising in sectors that rely on high leverage or tight margins. These are the early signs of an economy losing momentum, but losing it unevenly.
These trends show up in the types of scenarios brokers bring to us. More small businesses are seeking bridge financing, more households are restructuring debt and more borrowers want products that offer flexibility rather than long term commitment. These behavioural shifts matter just as much as the data releases.
Construction Is Finally Cooling, and That Shifts the Inflation Story
One of the clearest turning points is construction. After two years of feeding inflation through soaring building costs and intense project demand, the sector is now slowing. New projects are thinning out, materials cost growth is easing and wage pressures are calming. The pipeline of major developments has dropped sharply, which is a powerful indication that the next two years will look very different to the last two.
For the RBA, this matters because construction has been a strong domestic driver of inflation. It signals that inflationary heat is genuinely coming off and that the groundwork for rate cuts is forming even if the timing remains uncertain.
Households Are Split Between Caution and Optimisms
Consumer sentiment is no longer moving in one direction. Some Australians remain deeply cautious due to rising living costs, while others are beginning to feel more optimistic for the first time in years. It creates a two speed confidence environment where certain groups are ready to spend and others are retreating.
For brokers, this split already translates into different borrowing behaviours. Some clients are planning ahead with upgrades or new purchases, while others are purely focused on managing cash flow until relief arrives.
Why Analysts Can’t Agree and Why They Don’t Need To
With these contradictions piling up, market commentators are drifting apart. Some predict rate cuts late in 2026, others claim the slowdown we are seeing in construction and household momentum will pull the timeline forward once inflation genuinely trends lower.
The exact date is not the critical issue. What matters is the direction of travel. Momentum is easing, cost pressures are moderating and the economic temperature is cooling, even with a stubbornly strong labour market. The path to lower rates is forming, the timing simply depends on how quickly inflation reacts to these shifts.
What This Means for Brokers and Borrowers Right Now
This kind of environment demands clear headed lending strategies. With uncertainty still hanging over the rate cycle, our priority is to provide solutions built on:
• reliable and fast turnaround times
• flexibility for borrowers navigating volatile conditions
• certainty in approvals when other lenders hesitate
• transparent fees and clear structures
• strong exit pathways that protect both borrowers and brokers
While economic signals may be clashing, your clients still need clarity. At FINSTREET, we help brokers cut through the noise with funding solutions that stay stable even when the broader outlook does not.
