FEAR & GREED | Business News Q+A: Is the economy too strong for an interest rate cut?
Nov 12, 2025
Recent economic data shows a surge in consumer sentiment and improved business conditions, raising questions about the potential for interest rate cuts next year. CBA's Matt Comyn highlights the resilience of the Australian economy, while experts debate the implications of these trends. Capacity constraints might signal inflation risks, complicating the rate cut scenario. As growth shifts from the public to private sector, homeowners and small businesses could feel the effects, navigating a landscape of rising house prices and a return to normal interest rates.
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Banks See Stronger Household Momentum
- Commonwealth Bank data and Matt Comyn indicate Australian household income and spending are strengthening.
- If private-sector growth drives capacity constraints, inflation risks rise and rate cuts become unlikely.
Capacity Constraints Signal Inflationary Risk
- NAB business conditions show capacity constraints, signalling production limits amid rising demand.
- Capacity constraints can translate into renewed inflation pressure, which deters rate cuts.
Private Sector Taking The Lead
- Growth appears to be shifting from public to private sectors, indicating a more sustainable recovery.
- Private-sector-led growth strengthens the outlook and reduces the case for further rate relief.