Shipping transits resumed, perhaps only temporarily, through the Strait of Hormuz, lifting some of the fog-of-war to reveal increasingly frothy financial markets. The US labour market has stabilised, with a declining participation rate doing much of the work in keeping unemployment contained. Inflation remains too high in most developed economies, while stratospheric levels of AI CAPEX drive equity markets. Meanwhile, an alien life form was discovered - it was SpaceX’s IPO valuation.
There are countless moving parts in the global economy, but three forces increasingly dominate the macroeconomic landscape: China's economic imbalance, persistent fiscal expansion, and the AI investment boom.
This quarter we examine each of these themes, together with the Australian economic outlook and the implications of the recent Federal Budget.