Australian Stocks Outlook for 2025

Australian stocks are projected to rise in 2025, driven by optimism about lower interest rates and economic growth, according to UBS analysts.

UBS forecasts the ASX 200 index will reach a record high of 8,850 points by the end of 2025, reflecting a 5% increase from current levels. The ASX 200 has already risen by 10.6% in 2024.

The analysts view the Australian economy and stock market as a relatively 'safe port' amidst ongoing global trade and geopolitical uncertainties. Increased local buying is anticipated as investors seek refuge from escalating U.S.-China tensions.

Australia's limited trade exposure to the U.S. reduces its risk of tariff-related issues with the incoming Trump administration. Additionally, strong security ties with Washington solidify Australia’s role as a key ally in the Asia-Pacific.

UBS foresees a mid-single-digit earnings growth for Australian companies in 2025, concluding a cycle of earnings downgrades since 2022, coinciding with an expected interest rate cut from the Reserve Bank starting in May 2025.

The brokerage favors technology stocks due to ongoing demand for artificial intelligence. Australian insurance stocks are also appealing due to their strong pricing power and favorable valuations, while industrials are attractive because of their links to the U.S. economy.

Furthermore, mid-cap stocks in Australia are expected to outperform in 2025, supported by robust tech, classifieds, and healthcare sectors.

The ASX 200 reached new highs in November, fueled by positive expectations for global economic growth and favorable conditions in economically sensitive sectors. Major mineral and mining stocks also benefited from anticipated stimulus measures in China, a crucial export market for Australia.