Westpac Market Outlook November 2026
Our latest thinking on Australia, markets and the global economy.
Read full report 'Westpac Market Outlook November 2026' (PDF 3MB)
It has been an action-packed few weeks for markets. The US 2026 mid-term elections were a repudiation of President Trump that will see the Democrats take control over both houses of Congress. Together with tentative signs of easing tensions in the Middle East, Brent crude oil fell from just under US$120/bbl to roughly US$95/bbl, back around the post-Iran-conflict average. The associated easing in inflation fears has supported a continued descent in bond yields and rally in risk sentiment – albeit with significant ‘wrinkles’ around a high US inflation read and an AI-led pull-back in equity markets that has been compounded by the sudden resignation of NVIDIA’s CEO.
Many central banks have already begun re-tightening policy – the latest additions to the pack now including the Bank of Canada and the Bank of England – but what comes next will differ widely across jurisdictions. In the US, the combination of strong activity and sticky inflation have led FOMC members to more strongly advocate for further tightening. We have added a January hike to the December move already in our forecasts before a long pause and eventual cuts in 2028.
Europe shares an inflation concern but not so much strength on the growth front. The ECB sees activity near trend and is uncomfortable with inflation at 3.8%yr, so we expect a December hike as insurance. Unlike market pricing though, we think that will be the last, with energy and investment-related price pressures easing through 2027 and scope to ease back towards neutral in 2028. China faces a very different challenge – not too much demand but too little. Industrial strength and technology investment are providing support but we expect policy direction and stimulus by early 2027 will be needed to turn household demand, with property the most likely catalyst..
The RBA meanwhile followed its September hike with another in November, but the Governor’s call to ‘take stock’ signals a December pause, and we think the hiking phase is now more clearly over, with a move to cuts pencilled in for the second half of 2027. While a February hike is not completely out of the question, policy is clearly restrictive and downside risks are crystallising. Reflecting this, we have downgraded our GDP, labour market and housing market forecasts for 2027.
Australia: The housing downturn has been sharper than expected and is set to spill over more materially into the broader economy. The scale of these spillovers should become clearer over coming months, keeping the RBA on hold as downside risks to growth build. Business investment remains a source of resilience, led by data centres and renewables, but rising costs and growing community opposition has seen some projects shelved. Still, the supply-side picture is constructive, with strong investment in parts of the market sector driving capital deepening and productivity, but this has been uneven.
Commodities: The commodities complex was a story of two halves in October, with sharp gains across energy commodities offsetting weakness elsewhere and lifting our broadest commodities index 0.6%mth. Reflecting continued energy-market tightness, we expect Brent to average US$101/bbl in Q4 and have raised our Q4 Japanese LNG forecast to US$27.
Global FX Markets: Of late, risks have favoured the US dollar and FOMC member concerns have been decidedly one-sided towards inflation. The DXY has consequently continued to test the upper limit of its 18-month range, but remains inside it.
New Zealand: A busy month in New Zealand has included a tight – and currently inconclusive – general election, a surprise hold by the RBNZ at its October policy review and a somewhat disappointing Q3 labour market report. However, the medium-term outlook remains little changed, with a recovering economy and above-target inflation likely to lead to further monetary policy tightening over coming months.
Pacific: Distance from major markets, small domestic economies and a heavy reliance on imported fuel and food mean global disruptions tend to reach the Pacific at a higher cost. However, most Pacific countries face the latest shock with somewhat better buffers.
United States: Data suggests the US carried strong momentum in to H2 2026. But questions are being asked over the profitability of AI deployment, household real incomes are trending flat to down, and term interest rates continue to weigh.
China: China GDP surprised to the upside in Q3, keeping authorities on track for 2026, but more importantly offering a little more time to accelerate domestic demand in to 2027.
Asia: We expect the BoJ to raise its policy rate by 25bps to 1.50% in December, before gradually taking it to 2.0% through 2027. The case for further tightening rests on the evidence that firms are more willing to raise prices, labour scarcity supports persistent wage growth, which should in turn support spending.
Europe & UK: The ECB left its key policy rates unchanged in October. Another hike is forecast in December. Against market pricing, we expect this will prove the last for the current cycle.
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