Welcome to AGR’s October 2025 Insights Newsletter.
For this month, we have focused our Insights on the SME Business sector, with our articles covering Payday Superannuation and cash-flow management strategies.
The RBA will most likely not cut rates at their Melbourne Cup Day meeting in November. Key inflation data (core inflation) just released came in at 0.9% which for the RBA is way too high. Next chance of a cut is February 2026.
An interest rate cut seemed on the cards when the labour market numbers for September were reported a couple of weeks back. The unemployment rate surged to 4.3% on the back on softer job growth and the expansion of the labour force. The underemployment rate rose from 5.7% to 5.9%, while the underutilisation rate climbed from 10% to 10.4% in September.
Job growth continues to slow with annual employment growth slowing to 1.5% for Q3 from 2.2% for Q2.
Even though the labour numbers look soft, the RBA is still more concerned with inflation.
This morning the September 2025 quarter CPI came in at 1.3% and 3.2% annually. This is outside the range for the RBA. The RBA’s preferred measure of core inflation – the trimmed mean – was 3% for the September 2025 quarter. Electricity costs were the biggest contributor to the rise of inflation in this quarter.
Gold – too high or too low – or just right. So many goldilocks jokes to be spun out soon. Topping out at US$4,381 an ounce is incredible. The lineups by individuals to buy the precious metals were shown over the social media pages over the last couple of weeks – just as the price peaked. Maybe just for now. Miners have seen their share prices jump over the last six months as it seemed the rise of the price of gold would never end. With Trump trying to get a trade deal with China and the potential for a Federal Reserve interest rate cut the safe haven argument of gold had subsided. I am not so sure we will see a plunge in the gold price in the near term. Certainly, there will be volatile wild swings in the gold price as speculators decide whether they are in or out. Retail investors were flooding into ETFs – that money flow is now slowing. There is a lot of geopolitical tension to go alongside trade tensions and high government deficits none of which is going away any time soon. Some market commentators are suggesting a 20% retracement to US$3,500 in the short term. Either way, gold is a hedge in this current environment and at these prices, still a handy investment.
During the month, the Federal government announced changes to the Div 296 tax legislation. This piece of legislation reduces the tax concessions on superannuation earnings for individuals with balances exceeding $3 million.
What has changed? There will be no taxing (at this stage) of unrealised capital gains. But there is now a two-tier system rather than one flat tax rate.
- The total concessional tax rate applied to earnings on balances between $3 million and $10 million will increase from 15% to 30%.
- The total concessional tax rate applied to earnings on balances over $10 million will increase from 15% to 40%.
Please note that the additional tax applies on a sliding scale, so there is no sudden 30% tax on super earnings. Contact your advisor to discuss further.
Another change is that the $3m and $10m thresholds will be indexed. A welcomed announcement to an unpopular tax. The start date is scheduled for 1 July 2026.
This legislation is still not law. Be mindful of doing too many things prior in case further refinements are made to the legislation.
Australian property prices are never too far from people’s discussions at any event. House prices are still going up and construction costs are going up as well.
House prices are estimated to continue to rise in 2025 and in 2026 (around 4%). Affordability is still an issue. Interest rate cuts can help but this might not be a deep cutting cycle. There is some data suggestion that suburbs in certain capital cities are now falling which has been unheard of for some time.
At interesting perspective from Australia’s biggest commercial construction company – Hutchinson Builders – in their latest financial position statement, their earnings to June 2025 doubled to 1% of revenue. Scott Hutchinson was quoted as saying it would be nice to get to 2% but that is being hopeful. With revenue in excess of $3 billion there is still very little room for error. Some commentators have called the bottom of the cycle, and that commercial construction will start to make some money again. One can only hope that all players in the construction sector can make money. Insolvencies are still high compared to a year ago – so perhaps it is a case of last company standing.
The US share market surged to new record highs on the back of weak September 2025 CPI numbers. The CPI was 3% (annual) for the month which was less than consensus. Market commentators believe the Federal Reserve will cut interest rates again this week by 25bps. After this meeting the optics on future interest rate cuts are not so clear. The Federal Reserve are worried over the labour market weakness and some commentators believe further interest rate cuts will total another 100bps. That would certainly put a rocket under equity markets.
Tariffs do not seem to be creating a spiking of prices for goods and services and this is what is keeping CPI benign. I am sure that tariff related inflation is somewhere and is creeping into the pricing decisions of CEOs and business owners. Suppliers and/or businesses cannot keep absorbing tariffs without starting to pass some of the pain on to consumers.
The current quarterly reporting season is not showing margin contraction, but some companies in the real economy have lowered their revenue targets for the full year.
The magnificent seven are still magnificent and data centres are still being built and companies associated with the data centre are still achieving high valuations. The term the 4th industrial revolution has been banded around to group this whole thematic together. Could be right?
Data centres need a lot of power and a lot of cooling. Companies that can reduce power and provide the cooling whilst maintaining the processing capabilities of the semiconductor chips will be in front. For those wondering about nuclear – some time off but being considered in the USA, especially the modular reactors. Companies want clean energy and unfortunately wind and solar are not consistent enough at this point, so the electricity market is doing all the heavy lifting. At some point the grid will be full and then what will happen to data centres? Will the lights go out inside residential houses? That would be a political nightmare.
We have had two new team members commence with us over the last month – a big welcome to Tiffany Chen and Micaelle Reyes who join AGR as an accountant and bookkeeper respectively.
I mentioned in our last newsletter that Mick McLoughlin was attempting to achieve a world record for hitting the most golf balls in a 24-hour period. I can confirm that Mick set a new world record of 11,052 balls which beat the previous record by some amount. Congratulations to Mick and his team for a great achievement.
After such a wonderful grand final fortnight where our Brisbane Lions and Brisbane Broncos (both men and women teams) won their respective grand finals, what do we do now? Melbourne Cup is next Tuesday and then The Ashes Test series starts 21 November. The entertainment never stops.
For any further information on what’s discussed throughout our Newsletter for this month, please feel free to contact the Adviser team – who would be happy to assist where possible.
Author: Ian Walker
Executive Chairman