Australia’s economy kicked off 2026 with unexpected strength. As global markets hesitated, business activity across the country moved firmly into growth territory. The signal is clear, even if questions still linger in the background.
Economy Strengthens as Composite PMI Rebounds
The latest figures from S&P Global show a clear acceleration. The Flash Australia Composite Output PMI rose from 51.0 in December 2025 to 55.5 in January 2026. This index, which combines manufacturing and services performance, uses 50 as the expansion threshold. The current level is the highest seen in several months.
“January’s S&P Global Flash Australia PMI indicated that business activity growth accelerated in the opening month of the year,” said Jingyi Pan to Yahoo Finance, Associate Director of Economics at S&P Global Market Intelligence. According to her, the rise reflects “resilient economic conditions” and growing demand, both domestic and international.
In practical terms, this means more orders, more production, and a more confident private sector. But it’s still early days, and the broader economic picture remains mixed.
Overseas Demand Sparks Hiring Gains
One of the strongest contributors to the positive data was foreign demand. Export orders lifted activity across both manufacturing and services. New work inflows prompted companies to increase staffing levels.
Data from the Australian Bureau of Statistics supports this trend. In December 2025, the country added 65,000 new jobs, well above market expectations. A striking detail: a significant portion of that growth came from young workers aged 15 to 24. This group, often more vulnerable to downturns, is re-entering the labour market with momentum.
These hiring gains point to more than just seasonal recovery. They suggest that businesses are willing to invest in growth, at least in the short term.
Manufacturing Costs Remain a Risk for Inflation
While the numbers look encouraging, some risks haven’t gone away. Inflation, particularly on the input side for manufacturers, remains a threat. Pan warned that rising input costs in the manufacturing sector could revive price pressures in the coming months.
That said, output price inflation—what businesses actually charge—appears to have softened, thanks in part to more stable pricing in services. This balance is delicate. The Reserve Bank of Australia will be watching closely, as persistent inflation could complicate monetary policy decisions later this year.
A Promising Start That Needs Confirmation
The Australian economy has opened 2026 with strong signals: rising output, renewed hiring, and solid export demand. It’s a welcome change after months of cautious growth and policy uncertainty.
But one month doesn’t make a trend. Questions remain around global supply chains, price stability, and the central bank’s next move. Whether this momentum continues—or fades under pressure—will depend on how the next few months unfold.
