"Uncertainty over US trade policy and geopolitics continues to weigh on the global economic outlook, with world growth expected to slow to below trend over the remainder of this year and into 2026. In addition to the sharp rise in US tariffs, which raise prices and weaken the economy, President Trump has passed his One Big Beautiful Bill fiscal support package. Inflation will rise above 3% in the US, but growth is expected to slow sharply, leaving the Fed facing a difficult choice. We expect rates to be lowered gradually, at a pace of one 25bp cut per quarter over the next year. Australia's economy will outperform its global peers, but growth will remain modest this year before strengthening into 2026. Slower inflation will also allow the RBA to cut interest rates by another 50bps this year."

Dr Matthew Peter, QIC Chief Economist

"Rising geopolitical tensions and trade uncertainty continue to weigh on the global economy, and we expect forward looking growth to be tepid and market conditions to remain volatile. Over the medium term, we expect the impacts of AI, developed market debt dynamics, trade policies, fiscal policy sustainability and geopolitical ructions are likely to remain in focus. Uncertainty is likely to persist over the longer term, with themes like protectionism, a multipolar world, populism and waning US exceptionalism having the potential to reshape the global order. In this environment, we remain focused on building resilience and diversification within State Investment Portfolios – augmenting existing exposures with uncorrelated investments and seeking out yield-based strategies that offer relatively attractive risk vs reward characteristics."

Allison Hill, QIC State Chief Investment Officer