Monthly Market Commentary
As at 30 September 2026
Economic review
Australia
Australia: RBA resumes rate hikes during September
The RBA raised rates by 0.25% to 4.6%, its fourth hike in the current tightening cycle. It has raised rates by 100 bps over the last six meetings and remains focused on ensuring that high inflation does not become persistent. The RBA is willing to accept a weaker labour market and subdued growth to reduce capacity pressures and achieve lower inflation.
Australian Q2 2026 GDP showed the economy grew by 0.4% QoQ, slightly above market expectations of 0.3% and the 0.3% growth recorded in Q1 2026. Annual growth was 2.1% YoY, also above expectations, but down from 2.5% in the previous quarter.
The unemployment rate rose to 4.6% from 4.5%, its highest level since November 2021, despite headline employment growth significantly beating expectations. This was driven by a surge in labour force participation, with more people previously outside the labour force moving into unemployment.
The S&P Global Australian Flash Composite Purchasing Manager’s Index (PMI) fell to 50.8 in September from 52.7 in August, a three-month low, as manufacturing PMI dropped into contraction (49.3) and services PMI growth slowed from 53.2 to 51.4 in September.
International
Fed joins other central banks in raising rates
US economic data in September showed the economy remained strong, with Flash PMIs rising to 58.4 from 56.0, beating expectations. Manufacturing and services both gained momentum, marking the strongest reading since the pandemic bounce in July 2021.
The Fed voted unanimously to raise rates by 25 bps to 3.75-4.00%, in line with expectations; while upgrading its growth and inflation forecasts. The BoE kept rates unchanged at 3.75%, noting upside risks to inflation. The ECB raised rates by 0.25% and slightly lifted its growth outlook.
New Zealand Q2 2026 GDP rose 0.2% QoQ and 2.6% YoY, both above expectations; while prior-quarter growth was revised up to 0.9% QoQ. The data suggests the economy is continuing to recover; although spare capacity remains, with unemployment at 5.6%, likely near its peak.
Market Review
Australian shares fell amid broad based selling
Australian shares fell -2.4%, underperforming international shares (hedged). Only two sectors out of 11 in the ASX300 rose over the month.
The healthcare sector was the best performer in September, up 4% on analyst upgrades; while energy was the second best performer, up 1.2%, as the Middle East conflict pushed oil prices higher.
The information technology sector was the weakest performer, down -9.8%.
International shares (hedged) fell, pausing after a strong five-month rally
International shares (hedged) fell -0.7%, following a five-month rally of 17.1%.
The best performing sector was the information technology sector, up 4.5%, as AI stocks saw strong performance over the month. The weakest performer was the materials sector, down - 6.1%.
Emerging market shares (unhedged) rose 2.4%, as the technology heavy Taiwanese and South Korean stock markets performed well over the month.
Fixed interest underperformed as government bond yields climbed
Australian government bonds fell -0.9%, and international government bonds fell -1.4%, as Australian and International bond yields moved higher.
Over the month, central bank rate expectations were repriced higher, as several central banks raised interest rates.
International credit (hedged) was lower, by -2.2%, driven by both rising bond yields and widening credit spreads.
Real assets fall as interest rates rise
Real assets were lower, as these interest sensitive sectors were heavily impacted by rising bond yields.
International listed property declined -5.2%, international listed infrastructure fell -4.8%, and Australian listed property was down -1.9% during September.
The AUD weakened, as US bond yields rose more quickly than Australian bond yields
The AUD fell -3.1% against the USD, as interest rate expectations in Australia and the US narrowed over the month.
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