1. Australia's cost of living index is projected to rise sharply by 4.2% in 2025.
According to statistics released by the Australian Bureau of Statistics (ABS) on February 4, 2026, the country's Living Cost Indexes (LCIs) recorded a sharp increase from 2.3% to 4.2% in 2025 up to the end of the fourth quarter of 2025. In the fourth quarter alone, the LCIs increased from 0.1% to 0.7%. Housing, food, and entertainment were the main factors driving this increase.
Source: ABS
Specifically, households recorded higher electricity and rent costs, in addition to a sharp price increase for tobacco due to a 5% increase in excise tax from September 1, 2025. The entertainment and cultural services group also saw increases across all households due to increased demand for travel and accommodation during the year-end holiday season. Rising food and beverage prices at restaurants and higher car fuel prices also contributed significantly to the increase in LCIs.
2. The Reserve Bank of Australia raised interest rates to 3.85% [2]
Source: RBA
At its first policy meeting of 2026 on Tuesday (February 3, 2026), the Reserve Bank of Australia (RBA) raised its benchmark interest rate by 25 basis points, from 3.60% to 3.85%. This was the first rate hike since November 2023, following a rise in inflation to 3.8% by December 2025, higher than the RBA's forecast of 2-3%. Increased cost pressures in the second half of 2025 due to rising service costs and a strained labor market were the primary reasons for this decision. The Board stated that further policy actions would depend on new economic data and an assessment of evolving prospects and risks, including maintaining a balance between inflation control and economic growth.
3. Australia's merchandise trade surplus reached AUD 776 million.
According to statistics released by the Australian Bureau of Statistics (ABS) on February 5, 2026, Australia had a merchandise trade surplus of AUD 776 million in December 2025 compared to the previous month. This was due to an increase of AUD 440 million (1.0%) and a decrease of AUD 336 million (0.8%).
Source: ABS
Specifically, total merchandise exports reached AUD 44.6 billion in December 2025, up 1.0% from the previous month, mainly driven by metal ores and minerals. Agricultural goods reached AUD 7.1 billion, up 2.5%, primarily focused on meat and meat products with exports of AUD 2.5 billion, up 2.4%. Non-agricultural goods reached AUD 31.8 billion, up 1.0%, led by metal ores and minerals with exports of AUD 14.2 billion, a growth of 3%. Net exports of non-monetary gold decreased slightly by 0.9%, reaching AUD 5.5 billion.
Regarding imports, total merchandise imports reached AUD 41.2 billion, down 0.8% from the previous month, mainly due to a decrease in exports of intermediate goods and other goods with high export value (AUD 16.7 billion, down 1.3%). This was followed by the group of production materials at AUD 9.6 billion, down 2.5%, while the group of consumer goods reached AUD 12.6 billion, recording a slight increase of 0.8%.
4. The Australian government is accelerating its green roadmap with the Net Zero Fund.
The Net Zero Fund (NZF), a key component of the National Reconstruction Fund (NRF), will begin disbursing A$15 billion from mid-2026, with A$3 billion allocated to priority areas including renewable and low-emission energy technologies. NZF will focus on supporting the transition to carbon-reducing manufacturing and production processes, expanding domestic production of renewable and low-emission energy technologies, and supporting businesses involved in: the production, transmission, distribution, or storage of renewable energy; energy optimization; recycling; and waste reduction, such as the production of components for wind turbines, batteries, solar panels, and hydrogen electrolyzers.
Source: Australian Department of Industry, Science and Resources
To ensure the effective operation of the NZR, the Australian Department of Industry, Science and Resources conducted consultations with over 60 senior representatives from organizations in the industrial and energy sectors, trade unions, researchers, and research institutions.
5. Risk warnings for the Australian iron ore industry.
Australia's Commonwealth Bank has issued a pessimistic warning about the Australian iron ore industry, suggesting that China will increasingly reduce its reliance on Australian iron ore imports if it uses its current dominance in the iron ore market to exert pressure under US influence.
Source: Finance Review
Although iron ore remains China's biggest trade weakness, with Australia accounting for approximately 60% of China's steel supply, the situation is gradually changing.
This reduction in dependence is demonstrated by China's investment in a $23 billion joint venture with Rio Tinto in the Sumatra project in Guinea. According to information from China Baowu Steel Group, the world's largest steel producer, the first shipment from this project arrived at Zhejiang port on January 17th, and the second shipment is expected to arrive in China in the coming days.
According to economists' forecasts, the expansion of supply from Simandou could push iron ore prices below $100 per ton, or even below $80 per ton in 2026.
6. AUD/USD Exchange Rate Movements
The Australian dollar has seen a significant increase against the US dollar in recent days, at one point surpassing 0.7 before adjusting slightly back to 0.69 yesterday, February 5th.
According to financial experts, this fluctuation is influenced by both short-term and long-term factors. In the long term, interest rate differentials are the main factor affecting exchange rates, with monetary policy decisions by the Reserve Bank of Australia (RBA) playing a crucial role in shaping exchange rates. Other factors include international trade, commodity prices, and inflation. In the short term, exchange rates are influenced by the level of risk investors are willing to accept when investing and speculating.
Source: https://moit.gov.vn/tin-tuc/ban-tin-thi-truong-uc-tu-31-1-6-02-2026-.html
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