Australia’s economy is like a car exceeding the speed limit.
Or is it an inflating balloon, squeezing up against the inside of a box?
Either way, it’s too hot for the Reserve Bank to handle.
Fresh data in the coming week will give the central bank more of an idea about whether it needs to raise interest rates again or if its February hike was enough to get the economy back on an even keel.
While the resurgence in inflation that forced the Reserve Bank’s hand was due to a number of factors, Governor Michele Bullock said, the speed at which consumer spending and business investment surged in the second half of 2025 caught the board off guard.
“Private demand looks to have increased more strongly over the latter part of last year than we were expecting,” she told a parliamentary committee on Friday.
Treasurer Jim Chalmers revealed he would introduce long-promised changes to superannuation tax concessions to parliament on Wednesday, pending an agreement with the Greens.
Speaking to ABC’s Insiders program on Sunday, he also flagged that he was working on a productivity package for the May budget, which would aim to address the long-term supply constraints concerning the RBA.
“Really, the emphasis in the work we’re doing for the budget is attracting more investment,” Dr Chalmers said.
“If we attract more investment, we lift the speed limit on the economy, we make our economy more productive, more dynamic and more competitive.”
How resilient household spending remains will be put to the test in figures released by the Australian Bureau of Statistics on Monday.
Consumption grew faster than expected in November, partly boosted by Black Friday sales, before consumer confidence slumped amid fears of more rate hikes.
Economists believe households reined in their spending in December, with ANZ Bank’s Aaron Luk tipping a 0.5 per cent increase, above consensus forecasts.
“We expect solid services spending in December, while goods spending likely slowed following major promotional events in prior months,” he said.
The Westpac-Melbourne Institute consumer sentiment index slipped to 92.9 in January and could fall even further on Tuesday following the rate hike.
NAB’s business survey will also be released on Tuesday.
Another sign of the economy’s strength has been a rebound in housing investment, which has been pushing up dwelling prices.
The Australian Bureau of Statistics’ release of credit growth figures on Wednesday will indicate whether banking regulator APRA’s new restrictions on risky lending have had any effect on dampening investor demand.
It will also be a big week for Australian shares, with Commonwealth Bank, CSL and AGL Energy reporting half-year earnings on Wednesday, Origin Energy and goldminer Northern Star providing updates on Thursday and med-tech company Cochlear reporting on Friday.
Fresh from their parliamentary grilling by MPs in Canberra, top Reserve Bank officials will front up again, with senators getting their turn to ask questions on Thursday.
Wall Street investors are meanwhile breathing a sigh of relief after indices came roaring back on Friday, with technology stocks recovering much of their drops from earlier in the week and bitcoin halting its plunge.
The Dow Jones index rose 1,206.95 points, or 2.47 per cent to finish beyond the 50,000 mark for the first time, at 50,115.67.
The S&P 500 rallied two per cent for its best day since May and the Nasdaq composite leapt 2.2 per cent.
Australian share futures surged 92 points, or 1.06 per cent, to 14,653.
The S&P/ASX200 fell 180.4 points on Friday, down 2.03 per cent, to 8,708.8, as the broader All Ordinaries tumbled 200.3 points, or 2.19 per cent, to 8,954.6.