While the RBNZ has lifted interest rates by 50bp and signalled that as much as 200bp of tightening is still to come, the RBA’s central scenario remains that interest rates won’t be raised until 2024. While we have pencilled in the first RBA rate hike for early-2023, there are good reasons for the RBA to be more dovish. While New Zealand’s household savings rate was back at pre-virus levels just before the latest lockdown, it was still well above it in Australia. And while New Zealand has recently recorded a record trade deficit of 3% of GDP, Australia has recorded a record trade surplus of 5% of GDP. With New Zealand’s domestic demand overheating, it’s no surprise that most measures of core inflation are now at or above the top-end of the RBNZ’s inflation 1-3% target range, whereas underlying inflation in Australia has only recently climbed into the RBA’s 2-3% target range.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services