Australian dollar rises as Albanese secures second term

The Australian dollar climbed above $0.645 on Monday, reaching its highest level in nearly five months following Prime Minister Anthony Albanese’s victory in Saturday’s federal election, which secured him a second three-year term.

Australian dollar rises as Albanese secures second term

The election result was welcomed by markets as it signaled political continuity and policy stability. In his post-election remarks, Albanese pledged to lead a “disciplined, orderly” government focused on alleviating cost-of-living pressures, fostering economic resilience, and navigating global trade uncertainty. Investors responded positively to his reaffirmed commitments to key structural reforms, including expanding renewable energy capacity, easing the housing affordability crisis, reducing taxes, and increasing investment in Australia’s strained public healthcare system—all seen as potentially supportive for long-term growth. Albanese’s emphasis on infrastructure spending and clean energy development has also boosted sentiment around Australia's medium-term economic outlook, particularly as the country seeks to position itself as a leading supplier of critical minerals and clean technology components in the global energy transition. These policies are expected to attract foreign investment and create jobs, lending further support to the Australian dollar.

Market expects RBA to cut rates

On the monetary policy front, expectations are mounting that the Reserve Bank of Australia (RBA) will cut its benchmark interest rate by 25 basis points to 3.85% at its May meeting, following a steady decline in inflationary pressures and signs of weakening global demand. Markets are now pricing in additional rate cuts through the remainder of 2025, with the benchmark rate potentially falling to 2.85% by year-end. This dovish shift is driven by a combination of domestic disinflation and global economic softness, particularly in China and Europe—two of Australia’s largest trading partners. Despite the prospect of lower rates, the Aussie dollar has remained resilient, bolstered by commodity exports and optimism around domestic reforms.

Investors await US-China developments

Meanwhile, investors continued to monitor U.S.-China trade developments, a key external driver of global risk sentiment and regional trade flows. On Sunday, U.S. President Donald Trump reiterated that China appeared interested in a trade deal, although he offered no specific proposals or deadlines. Beijing has responded cautiously, maintaining that any new dialogue must be predicated on Washington removing existing unilateral tariffs. The uncertainty surrounding the trajectory of Sino-American trade negotiations continues to cast a shadow over global markets, but Australia's relatively balanced economic exposure and its strategic importance in the Indo-Pacific have helped insulate the Australian dollar from sharper volatility. As such, the AUD’s recent gains reflect a confluence of factors—improved domestic political clarity, a favorable policy mix, and relative stability in commodity markets—even as broader headwinds persist on the international stage.