Australian Economy and CRE Trends - February 2026

The global economy is navigating a period of divergent momentum in early 2026. While the overall outlook has been revised slightly upward, this masks differing estimates across major economies. Headwinds from shifting trade policies and geopolitical uncertainty persist, yet these are being partly offset by tailwinds from a surge in technology-related investment and adaptable private sector activity.​

Domestically, the Australian economy is demonstrating resilience, with economic growth anticipated to trend at 2.1% in 2026. This is supported by a gradual recovery in private demand, stable household incomes, and robust public spending. However, the labour market, while still tight, is beginning to show signs of softening, and persistent low productivity growth remains a key challenge for the nation's economic potential.​

The outlook for interest rates has been decisively reshaped by a recent resurgence in inflation. The annual Consumer Price Index (CPI) rose to 3.8% in the 12 months to December 2025. In response to these renewed price pressures, the Reserve Bank of Australia (RBA) raised the official cash rate to 3.85% in February 2026, the first increase since late 2023. Looking ahead, the economic path is intricate. The RBA faces a complex balancing act: curbing persistent inflation without derailing economic growth, particularly as the labour market begins to ease.​

Commercial property sectors underpinned by long-term structural trends, such as shifting demographics and technological advancements, are expected to demonstrate the greatest resilience. Investor focus is pivoting towards securing income growth, as the market has now largely priced in the recalibration of asset values from higher interest rates. Consequently, assets that can generate income streams that outperform inflation are becoming the primary driver of investment strategy.