The Australian economy has turned the corner, moving from below-trend GDP growth into a more sustainable expansion, supported by domestic factors including population growth, easing real income pressures, and resilient services activity.
Private sector momentum is now the dominant growth driver, with household consumption and non-mining investment providing higher-quality, earnings-positive growth than prior public-led phases.
The outlook for Australian earnings has improved with Forward EPS growth now positive after three years of declines.
The earnings recovery has however, been narrow and of low quality; heavily reliant on commodity price-driven upgrades in the Resources sector. Most sectors outside resources are undergoing downward revisions.
For the earnings recovery to be durable, non-resources sectors need to translate domestic demand and investment into sustained revenue and margin gains. Headwinds from rising bond yields, bank pressures, and AI capex concerns may delay a broader upswing.
We remain slightly underweight Australian Equities (for now).
