A new survey of businesses shows that New Zealand's retail industry is in dire straits. Given the sizeable contribution of retail trade to employment, the risk is that the labour market will deteriorate more rapidly than most anticipate. Accordingly, we're sticking with our non-consensus view that the RBNZ will start cutting rates at its next meeting in August. By contrast, there is growing speculation that RBA's next move will be up rather than down. Although that's not our baseline forecast, an upside surprise in next week's inflation data could easily tilt the scales in favour of a hike.
We will discuss the details of Australia's Q2 CPI data and their implications for policy, markets and the economic outlook in a Drop-In next Wednesday. Register here for the 20-minute online briefing.
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