The Australian economy in 2025 is defined by a perplexing paradox: record market highs juxtaposed with widespread economic anxiety, fueled by geopolitical tensions, domestic policy shifts, and a growing sense of inequity. Despite a seemingly buoyant market, underlying vulnerabilities and a “permacrisis” atmosphere are raising concerns about the long-term stability of the nation’s economic future.
A Year of Contradictions and Rising Fears
The year began with a sense of unease, as the World Trade Uncertainty Index climbed to levels exceeding those seen during the COVID-19 pandemic and the global financial crisis. This anxiety was reflected in the surging price of gold, which saw a 67% increase in value – a traditional safe haven asset for investors fearing economic collapse.
Adding to the global turmoil, the return of former US President Donald Trump to the White House and his swift implementation of substantial tariffs on trading partners sent shockwaves through international markets. While the impact on remote islands with non-existent exports may have been symbolic, the tariffs triggered market slumps and a renewed sense of chaos. As one analyst noted, “The only certainty from then onwards was uncertainty.”
Market Resilience and the “FOMO” Effect
Despite the headwinds, Australian markets demonstrated surprising resilience. The Nasdaq index of mega-tech stocks climbed 17% from the start of the year, while the ASX 200 – representing the nation’s 200 largest listed companies – rose 4.5%. This surge, however, felt detached from economic fundamentals.
George Tharenou of UBS described the situation as an “up crash,” driven by the “fear of missing out” (FOMO). This sentiment, coupled with the strong performance of the “Magnificent Seven” artificial intelligence-exposed companies, propelled market optimism despite underlying concerns. However, analysts are drawing parallels to the pre-2008 financial crisis, noting that it took 12 years for the ASX 200 to recover to its pre-crisis levels.
Systemic Risks and Regulatory Scrutiny
Concerns extend beyond global trade and market volatility. Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC), is investigating the Australian Securities Exchange (ASX) following “repeated and serious failures.” This scrutiny follows a lawsuit filed against the ASX for allegedly misleading statements regarding the progress of a critical system replacement project.
Unveiling the Uneven Distribution of Wealth
Perhaps the most unsettling revelations of 2025 came from leaked Treasury briefings, accidentally emailed to a journalist. These documents painted a stark picture of growing economic inequality, revealing that “low and middle-income earners are subsidising the retirement incomes of seniors with significant wealth in addition to their homes.”
The briefing highlighted a fundamental unfairness in the system, where those least able to afford it are propping up the financial security of the wealthy. This inequity, the documents suggest, is eroding public trust in the economic system and impacting perceptions of democracy, with fewer Australians believing that hard work leads to a better life.
Housing, Debt, and Declining Mobility
The housing crisis continues to exacerbate these inequalities. Decades-low job mobility, fueled by a tax system that discourages property sales and massive mortgage debts, is trapping Australians in their current circumstances. Despite three interest rate cuts by the Reserve Bank of Australia (RBA) during the year, high repayments continue to strain household budgets. The RBA itself has acknowledged that its efforts to curb inflation may not be fully effective.
Beyond Traditional Metrics
The challenges facing Australia extend beyond traditional economic indicators. Long-term issues like the energy transition, climate change-fueled insurance costs, and a shift towards a service-based economy are contributing to persistent cost-of-living pressures. Productivity growth is stagnating, and the measurement of productivity itself is becoming increasingly complex in sectors like healthcare and education.
Increasingly, an individual’s economic prospects are determined not by effort, but by their housing situation and asset ownership. Younger generations are burdened with debt, face the looming threat of climate change, and struggle to enter an increasingly inaccessible housing market.
Looking Ahead: A Practical Question of Survival
As 2025 draws to a close, the central question for many Australians is no longer about abstract economic theories, but about practical survival: “How are we going to make this work?” The confluence of AI bubbles, tariff turmoil, and market volatility has created a complex and uncertain landscape.
With that, I wish you all the best for a wonderful 2026. Thanks to our audience across Australia and beyond. A special thanks for all the people who’ve spoken to me and my ABC colleagues, so we that we can talk about business, the economy and how they impact your life. Here’s to peace and joy for the year ahead.
