Australia is poised for a cautious economic recovery in fiscal 2026, supported by easing inflation, interest rate cuts, and modest gross domestic product growth (GDP), despite ongoing global uncertainties, Commonwealth Bank of Australia (ASX:CBA) said in a media release on Wednesday.

CBA sees heightened global volatility in fiscal 2026 but expects a 2.3% GDP growth, stable inflation, and Reserve Bank of Australia rate cuts to support the economy amid risks to spending, investment, and the energy transition, the bank said.

The recovery should be supported by improving consumer spending, strong public investment, and rising housing prices, but global uncertainty, energy price risks, and construction bottlenecks may weigh on momentum.

Global economic conditions are expected to remain weak and volatile, as trade tensions, rising US tariffs, and geopolitical risks weigh on growth prospects, with only a slow recovery anticipated amid cautious central bank responses and persistent regional challenges, the bank added.

The Australian dollar faces a mixed outlook, with modest gains expected despite a weaker US dollar, as global trade tensions, geopolitical risks, and China's economic challenges continue to weigh on sentiment and export demand.

Commodity markets face ongoing volatility, with subdued oil and iron ore prices, a forecasted decline in Australian wheat output, and rising domestic energy costs driven by infrastructure expenses and gas supply challenges, the bank said.