Certainty in the rearview mirror as 2025 economy goes wild
SOURCE:ABC Australia|BY:Daniel Ziffer
This year saw economies survive tariff shocks and markets burst through record highs, but it doesn't feel like a party because so many people aren't invited.
I don't know what I expected. Not this. I blame the robots. I blame the penguins.
The economy of 2025 has challenged people's certainty.
A permacrisis. A flurry. Contradictions and causation, chaos and change.
Markets are at record highs, but it doesn't feel like a party because so many people aren't invited.
Wait, hold on — the World Trade Uncertainty Index is higher than it was during the COVID-19 pandemic or the global financial crisis. And gold is at record highs as well, up 67 per cent in a year!
That's what people buy when they fear the world will fall apart.
Meanwhile, our corporate regulator is investigating our (essentially) monopoly stock market provider — the ASX — after "repeated and serious failures", a phrase you could have said about it any time for the past decade.
(I reckon the time last year when ASIC sued the stock market operator for misleadingly saying a project to replace its systems was "progressing well" probably flagged that things weren't "progressing well").
Our global collective worry rocketed after US President Donald Trump — who in words, advertisements and deeds had promised substantial tariffs on friends, neighbours and enemies — did something truly shocking to global traders: announcing tariffs on friends, neighbours and enemies.
Donald Trump's first year back in the White House has been full of economic surprises. (Reuters: Elizabeth Frantz)
Markets slumped, chaos reigned, penguins on remote uninhabited islands shivered as tariffs were slapped on their non-existent exports to the United States.
The only certainty from then onwards: uncertainty.
Party time — right?
The Nasdaq index of mega-tech stocks is up 17 per cent from the already elevated level where it started in January.
The so-called Magnificent Seven artificial intelligence-exposed companies are pumping cash and optimism through markets. (Let's ignore the fact one of the most talked-about books this year is If Anyone Builds It, Everyone Dies: The Case Against Superintelligent AI).
Our ASX 200 group of the 200 largest listed companies is up 4.5 per cent — and it would have been more but for a wobble since October.
It's what George Tharenou of global investment fund UBS told me was an "up crash", with assets like share markets and property just heading skywards.
And he's not the only one suspicious of what seems like an empty boom in a dangerous time.
Analysts and experts talk about "2008 vibes" — what things felt like in the time just before the global financial crisis crushed the world economy. (It took 12 years for the ASX 200 to again reach the level it was at before the crisis).
The government's sovereign wealth store, the Future Fund, has $250 billion under management. Chief executive Raphael Arndt told The Australian Financial Review the year felt like a "perpetual inflection point — a permacrisis if you like".
"The weaponisation of trade, the persistence of inflation, climate shocks and a rising cost of capital — these all have tested the very assumptions that underpin investment theory."
We keep shredding economic norms.
That crushing inflation requires unemployment to rise.
That increasing cost of trade, tariffs, will crimp gross domestic product (GDP) growth (although that still might happen).
That gold booms when the market is falling.
And here's the biggest thing. We're talking about the "business" economy, the indices, the returns. They do affect people's lives. However, there's a lot more to it.
There are far bigger forces at play.
You aren't meant to know these incredibly obvious things people are talking about
Every time there's an election, the public service writes a manual for the incoming minister.
There's a "Red Book" in case of a Labor win and a "Blue Book" if the Coalition wins.
In May, Labor didn't just win; the Coalition was banished. In our two most populous cities, Sydney and Melbourne, there are collectively just three Liberal-held seats that don't include farmland in them. Three.
These so-called incoming government briefs are an honest look at issues facing the minister in their portfolio and are created for an audience of one: that person.
So I still kind of feel for the Treasury body that accidentally emailed me the one that only Jim Chalmers was meant to read.
Blunt doesn't cover what it told Jim, and we told you:
You need to lift taxes
You need to cut spending
Your key election promise, building 1.2 million homes? Not going to happen (unless you massively change things immediately)
Chalmers said he was "relaxed" about the release of the advice, which described actions most government economists, journalists and the data were all across.
Jim Chalmers faces big challenges in 2026. (ABC News: David Sciasci)
(Without labouring the point, the lawyers were less relaxed about it).
But it wasn't even the most impactful brief.
Buried in the manual for Social Services Minister Tanya Plibersek was this missile: There's a boomer boom as poor and middle-income people subsidise the incomes of older rich people.
Literally:
"Low and middle-income earners are subsidising the retirement incomes of seniors with significant wealth in addition to their homes."
Think about that. Poor people are subsidising the income of older non-working people who are significantly wealthy beyond owning their house.
People who don't need help are getting support from people who do.
Beyond being unfair, it is poisoning the well.
"The majority of Australians believe current income distribution is unfair," the brief reads, having been obtained using the Freedom of Information (FOI) process.
"This appears to be affecting views on democracy, as fewer people believe hard work leads to a better life."
We've tilted the playing field.
Job mobility is at decades-low levels as people stay put, imperilled by a tax system that makes buying and selling houses extremely expensive, tying people to mortgages so massive they dissuade people from taking risks.
Meanwhile, people with home loans are still getting smashed by high repayments.
The RBA dropped interest rates three times during 2025. (ABC News: John Gunn)
For all of 2024, the Reserve Bank's key interest rate stayed the same. Early this year it stuttered marginally lower — just as public anger was becoming white hot — going lower two more times, before flatlining again.
The RBA is now flagging its economy-throttling interest rates probably haven't beaten inflation.
No real shock. Lots of that cost-of-living pressure is driven by longer-term issues like the messy but necessary energy transition and climate-change-fuelled insurance cost surges.
Beyond that, we're seeing the hard-to-squash price rises of an economy where productivity is increasingly reliant on services provided by humans rather than machines that can squeeze widgets out faster.
Workers get slapped with accusations of slackness as our productivity rate stutters, despite the obvious and contentious nature of even agreeing on the measurement of the concept in rapidly expanding fields like health care, the NDIS and teaching.
Increasingly, your circumstances are divined by your housing situation, how you make your income (Wages? Schmuck. Assets? Genius) and are divorced from the effort you're putting in.
Younger people are being saddled with debt (personal and government), face the dizzying cost of dealing with the climate crisis, and then there's housing … a crisis that is literally consuming the waking thoughts of millions.
AI bubbles. Tariff turmoil. Market moves. They're all substantial, and they've shaped our lives in 2025.
This year, next year and beyond, the biggest question for an increasing number of Australians is less ethereal and more practical: How are we going to make this work?
With that, I wish you all the best for a wonderful 2026.
Thanks to our audience across Australia and beyond. A special thanks for all the people who've spoken to me and my ABC colleagues, so we that we can talk about business, the economy and how they impact your life.