The plunge in the prices of the key commodity exports of both Australia and New Zealand late last year will soon filter through into weaker domestic activity, resulting in GDP growth this year slowing to just 1.8% in Australia and to 2.3% in New Zealand. This will contribute to underlying inflation in both economies falling below the targeted ranges. We believe this will prompt both the RBA and RBNZ to reduce interest rates by more than is widely expected. By the end of the year, we expect that the RBA will have cut interest rates to 1.5%, from 2.25%, and that the RBNZ will have started to reverse last year’s hikes, by reducing rates from 3.5% to 3.0%.
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