Investment planning for 2025

In 2025, Australian investors face a financial landscape shaped by interest rate movements, global political shifts, and a looming federal election. With so much uncertainty, the key to financial stability is a well-diversified strategy that balances risk while positioning for growth.

So, what should investors be watching this year? In this post, we look at key influences and what we will keep an eye on.

The Reserve Bank of Australia (RBA) spent much of 2023 and 2024 battling inflation with aggressive rate hikes. But as inflationary pressures ease, there’s growing speculation that interest rate cuts could be on the horizon in late 2025.
This presents opportunities for investors. Lower rates could mean a resurgence in the property market, making real estate investment more attractive—especially for those using leverage. Equities, particularly growth stocks, could also benefit from lower borrowing costs, making strategic exposure to technology and innovation-driven sectors worth considering.

A federal election scheduled for 2025 introduces uncertainty into financial markets, but it also presents opportunities for investors who can anticipate and adapt to policy shifts. Key areas such as taxation, superannuation, housing, and business incentives will likely be central to election debates, each with potential implications for investment strategies. As financial planners, we help clients navigate these uncertainties and position their portfolios to benefit from potential policy changes while mitigating risks.

Taxation is generally a key reform debate during a federal election campaign. Possible changes to capital gains tax (CGT), negative gearing, or income tax brackets could have wide-reaching effects on investment strategies. For example:

If a new government tightens negative gearing policies, property investors may need to reconsider their approach, potentially shifting toward positively geared investments or alternative asset classes. Adjustments to capital gains tax concessions could influence whether investors hold or sell assets, impacting property and share markets. And changes to corporate tax rates may shift the appeal of domestic equities versus international stocks, affecting asset allocation strategies.

Investors should remain flexible and work with financial planners to model various scenarios, ensuring their investment strategies remain aligned with their financial goals, regardless of policy changes.

Superannuation remains a focal point in election cycles, and 2025 will likely be no different. Possible reforms include adjustments to contribution caps, changes to concessional tax rates, or shifts in access rules for younger Australians.

If the government increases concessional contribution caps, high-income earners may find additional opportunities to boost their retirement savings tax effectively.

Conversely, if the government tightens tax concessions for large superannuation balances, individuals with substantial super holdings may need to reassess their withdrawal strategies or consider alternative investment structures, such as family trusts.

Adjustments to early access provisions could impact how Australians use superannuation in financial hardship or property purchases, influencing financial planning strategies. Given these potential changes, investors should regularly review their superannuation strategies with their financial advisors to optimise tax benefits and ensure long-term retirement security.

Housing affordability and property investment policies are always contentious during election years. Several policy changes could reshape the market in 2025.

Stamp duty reforms in certain states could lower transaction costs and encourage property movement. First-home buyer incentives may shift demand away from the investment market, impacting rental yields.

A tightening of negative gearing rules could disincentivise property investment, leading some investors to consider commercial real estate or REITs (real estate investment trusts) as alternatives.

If there are tax incentives for build-to-rent developments, this could create new opportunities for investors interested in large-scale residential projects.
While the federal election is somewhat unpredictable, our financial planning ensures we take proactive steps to safeguard our clients’ portfolios.

Beyond domestic policy and global economic conditions, geopolitical events will also influence and shape financial markets in 2025.

The impact of the return of the Trump administration in the U.S. is anyone’s guess. It may introduce new tariffs, deregulation policies, and shifts in U.S. trade agreements. Stricter trade policies with China could disrupt global supply chains, affecting Australian exports, particularly mining and agriculture. Additionally, changes in U.S. interest rates and tax policies could lead to capital flow shifts that impact Australian equity markets. Eyes will be on the U.S. Federal Reserve interest rate policies: Higher rates could impact global markets, particularly in sectors sensitive to borrowing costs. Global supply chain disruptions may affect inflation, and logistical issues could impact investment returns across multiple asset classes.

As Australia’s largest trading partner, China remains crucial to economic stability. Any tensions or new agreements between the two nations could impact key sectors such as iron ore, coal, and agricultural exports. If relations remain stable or improve, this could bolster Australian export markets, benefiting companies heavily reliant on Chinese demand. However, increased tariffs or restrictions could push investors to diversify their holdings and seek alternative international markets.

Financial planning and investing will require a balance of caution and strategic positioning in the early part of 2025. While rate cuts could bring relief, global uncertainties and domestic policy shifts mean staying informed is more important than ever. By maintaining a diversified and flexible portfolio, investors can safeguard their financial future while capitalising on emerging opportunities. It will be interesting to analyse the position of renewable energy and electric vehicle incentives, the appetite for supporting innovation and technology sectors, and changes to business taxation policies.

We will be monitoring these influences closely.