Well that went quickly! As the year draws to a close, our central theme of uncertainty played out in 2025. Businesses that grabbed opportunities and managed their risks finished the year strongest. Expect 2026 to be another volatile year, with opportunities for those that are ready to move quickly.
1. Inflation remains
✓ Spot on. We called it early: the inflation genie was never back in the bottle. Much like the oil-shock of the 1970s, the slowdown in inflation bottomed out well above expectations, and cost-push inflation took over.
Businesses struggled with a structurally higher cost base, and those elevated production costs fed straight through to higher prices. Turns out rebates don’t fix inflation.
Market overconfidence in taming inflation finally cracked in September, when quarterly inflation jumped to 3.6% (up from 2.1% in June). October’s monthly numbers removed any doubt this was an anomaly, closing the year with inflation accelerating to 3.8%.
2. Interest rates stay higher
✓ Mostly right. As expected, borrowers hoping for rapid, deep rate cuts in 2025 were left disappointed. The market’s early year optimism ran head-first into rising inflation, tight labour markets, solid wage growth and governments unwilling to cool spending.
The RBA did move earlier than we anticipated, cutting in February, then again in May and August, for a total of 0.75% in 2025. The resulting 3.60% cash rate however is still well away from where markets thought it would land.
The yield curve tells the story. It began the year inverted and ended back in a more normal shape. Mid-year rate cut euphoria even saw NAB forecasting a neutral cash rate of 2.60% by early 2026. They weren’t the only ones.
The curve never fully bought the hype. The 3-year interest rate swap dipped to 3.19% and the 5-year swap to 3.58%. The 10-year swap stayed disciplined by focusing on fundamentals and held above 4.00%.
For 2026, borrowers need to rethink interest rate strategy. There is a real risk of higher interest rates to deal with inflation and more resilient global economies. Understanding what this means for already elevated farm production costs is critical.
3. Banks outsource account management
✓ The trend continues. We predicted that bank dominance of agricultural lending would accelerate and it has. More deals are flowing through brokers and consultants as regulatory and cost pressures push banks toward a more centralised, transactional, “box-ticking” approach. Relationship-driven banking is becoming the exception, not the rule.
Borrowers are increasingly seeking non-traditional lenders for a fresh value proposition, which is exactly why we launched Foundation Agri Finance two years ago.
RBA data confirms the shift, with bank market share dropping 4% since 2020. While they still dominate, long-term clients are frustrated with declining service quality and what feels like a “loyalty tax.” Many are now testing the market and that’s where brokers and alternative lenders step in.
4. A patchy 2025 for rural property
~ Pass mark. We anticipated a mixed property market, with values under pressure in regions facing seasonal or commodity stress and that’s how it played out. Overall, the market balanced out during the year, consolidating values after a period of strong growth.
High-quality properties still sold well, especially in southern Queensland and northern NSW, where seasonal conditions remained favourable. An example was Georgina Pastoral’s $66 million acquisition of “Taylor Plains” in Queensland’s Maranoa district – a fully developed, productive holding attracting strong buyer interest.
Secondary assets struggled. A record number of listings this spring left buyers spoilt for choice, putting downward pressure on prices and extending selling periods. Expect protracted selling times and deeper discounts in 2026.
Regions under financial stress, like drought impacted South Australia and warm-climate wine grape areas, saw land values drop by up to 30%. At these lower values the numbers are stacking up for change of land use to more profitable commodities. Further conversions are likely in 2026.
Corporate investment underwhelmed. While natural capital remains a popular theme, raising funds in a volatile global market proved tough. Investors with funds already raised were active like Gunn Agri, Manulife, Centuria and Warakirri who made selective purchases. New and existing fund managers faced slow capital raising and delayed fund closures, many now stretching into 2026.
What’s in Store for 2026?
More of the same. Uncertainty and volatility will be the story of 2026. The global mood is tense and that usually means more instability ahead.
We’ll spend the break pondering the signals (and consulting the tea leaves) before releasing our full 2026 predictions early next year. Suggestions welcome.
Wishing you a Merry Christmas and a safe holiday season. A big thank you to everyone who has supported our business this year, especially our high-quality clients.
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