Westpac Research & Economic Insights

Westpac's research highlights a complex intersection of geopolitical risk and shifting monetary policy across the Asia-Pacific region. While Middle East tensions have historically pressured energy-dependent economies like India, recent optimistic reports on US-Iran negotiations have triggered a market rally, easing oil prices and supporting risk-sensitive assets like the AUD. In the Pacific, a notable divergence has emerged as Australian headline inflation moderated to 4.2%, tempering immediate RBA rate hike expectations. Conversely, the RBNZ maintains a hawkish posture following a split decision to hold the OCR at 2.25%, with Westpac forecasting a potential tightening cycle starting in September 2026. Across Asia, China’s management of the USD/CNY fixing serves as a critical stability anchor amidst global volatility, even as tech-driven growth in South Korea and Taiwan masks underlying economic fragility. Overall, Westpac's outlook remains cautious, balancing easing headline inflation against rising long-term inflation expectations and persistent energy shocks.