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End of RBA’s tightening cycle is nearing The fact that the RBA discussed keeping the cash rate unchanged for the first time since the start of the current tightening cycle at its December meeting suggests that it won’t hike rates much further, though we …
20th December 2022
Revisiting the energy price cap The Australian government revealed details of its energy price cap on Friday and there are two points worth making. First, the $125 cap on coal prices refers to a lower-grade type of coal than we had thought, which means …
16th December 2022
Labour market strength won’t last much longer With employment jumping in November, the labour market is still tightening, The upshot is that the RBA will hike rates more sharply than most anticipate over the coming months. The 64,000 rise in employment in …
15th December 2022
Labour market strength won’t last much longer The continued strength in Australia’s labour market is consistent with our view that the RBA will hike rates more sharply than most anticipate over the coming months. The 64,000 rise in employment in November …
Growth burst will turn into slump next year The huge jump in Q3 GDP will prompt the Reserve Bank of New Zealand to press ahead with another 75bp hike in February, adding to our conviction that a recession lies ahead . The 2.0% q/q jump in production GDP …
14th December 2022
Economy will fall into recession in 2023 The huge jump in Q3 GDP will prompt the Reserve Bank of New Zealand to press ahead with another 75bp hike in February, adding to our conviction that a sharp downturn lies ahead. The 2.0% q/q in production GDP was …
The full impact of the RBA’s aggressive tightening cycle on household finances hasn’t been felt yet because one-third of all mortgages have fixed-rates. Around 60% of those will expire next year and the impact on household finances will be equivalent to …
13th December 2022
Overview – Soaring interest rates and weak real income growth will result in a more pronounced slowdown in economic activity in both countries than most anticipate. With New Zealand’s central bank determined to push the economy into recession, we’re now …
12th December 2022
Consumer spending surpasses pre-virus levels The main driver behind the 0.6% q/q rise in Australia’s Q3 GDP was a 1.1% q/q increase in consumption, which lifted spending above its pre-virus trend for the first time since the start of the pandemic. The …
9th December 2022
Net trade to boost GDP growth a bit in Q4 The October trade data point to a huge boost from net trade to Q4 GDP growth but we suspect that a further fall in exports will moderate that contribution. The decline in the trade surplus, from $12.4bn in …
8th December 2022
Net trade should boost GDP growth in Q4 The October trade data point to a huge boost from net trade to Q4 GDP growth but we suspect that a further fall in exports will moderate that contribution. The decline in the trade surplus, from $12.4bn in September …
Economy will come to a standstill next year The decent rise in Q3 GDP probably marks the last hurrah for Australia’s economy as tighter monetary policy and falling real incomes weigh on spending . The 0.6% q/q increase in Q3 GDP was a touch weaker than …
7th December 2022
GDP growth will come to a standstill next year The decent rise in Q3 GDP probably marks the last hurrah for Australia’s economy as tighter monetary policy and falling real incomes weigh on spending. The 0.6% q/q increase in Q3 GDP was a touch weaker than …
The RBA today hiked the cash rate by 25bp as widely anticipated and while the statement was marginally less hawkish, we’re sticking to our view that the Bank will lift the cash rate to 3.85% by April. The Bank’s decision to lift the cash rate from 2.85% …
6th December 2022
RBA not backing away from rate hikes just yet The RBA today hiked the cash rate by 25bp as widely anticipated and while the statement was marginally less hawkish, we’re sticking to our view that the Bank will lift rates to 3.85% by April. The Bank’s …
The proposed caps on domestic prices of thermal coal and natural gas are unlikely to be a major drag on mining investment because the bulk of coal and gas production is exported. And by helping to reduce inflation, they will allow the RBA to keep monetary …
5th December 2022
Soft data prompt repricing of rate expectations The financial markets this week scaled back their expectations for interest rate hikes by the RBA and are now pricing in a peak in the cash rate of 3.6%, down from 3.9% last week. (See Chart 1.) Chart 1: …
2nd December 2022
Strength in capital spending won’t last Private investment rebounded last quarter and while firms’ projections at face value point to a further pick-up over the remainder of the financial year, the figures are consistent with a slowdown in real terms . …
1st December 2022
Strength in business investment won’t last Private investment probably rebounded last quarter and while firms’ projections at face value point to a further acceleration over the remainder of the financial year, the figures are consistent with a slowdown …
Rapid worsening in affordability will continue to push down prices House prices continued to fall at a rapid rate in November and with housing affordability now the most stretched since the early 1990s, that downturn has much further to run. The 1.1% m/m …
30th November 2022
Labour market remains very tight but consumption moderating and inflation peaking Risks to our above-consensus cash rate forecast are shifting to the downside With GDP growth slowing sharply next year, we still expect rate cuts from late-2023 With …
Inflation still set to rise further in Q4 We wouldn’t read too much into the drop in the Monthly CPI Indicator in October because the figures don’t cover the entire CPI basket, but the data suggest that inflation is about to peak. Headline inflation …
Inflation may peak below 8% in Q4 We wouldn’t read too much into the drop in the Monthly CPI Indicator in October because the figures don’t cover the entire CPI basket, but the data suggest that inflation is about to peak. Headline inflation dropped …
RBA will keep hiking for now despite consumption slowdown Following a strong eight consecutive rises since the start of the year, the decline in retail sales in October isn’t a disaster. A fall in sales volumes across Q4 now looks very likely but we …
28th November 2022
RBA to keep hiking for now despite slowdown in consumption Following eight consecutive rises since the start of the year, the decline in retail sales in October isn’t a disaster. A fall in sales volumes across Q4 now looks very likely but we suspect that …
RBNZ willing to send New Zealand into recession While the analyst consensus is that New Zealand will generate decent GDP growth of just under 2% next year, we already predicted last month that the economy will enter recession. And with the RBNZ this week …
25th November 2022
The proposed multi-employer wage agreements risk further fuelling inflation by disruptive industrial action. And while employers could circumvent them by striking traditional enterprise agreements, there’s a risk that this locks in strong pay growth for …
24th November 2022
The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated but signalled a much higher peak in the OCR than in August. We’re now forecasting another 75bp hike in February followed by a final 50bp hike in April, but we …
23rd November 2022
RBNZ will hike rates above 5.0% The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated and it now seems likely that rates will peak closer to 5.5% instead of our current forecast of 5.0%. The statement was very …
Even though wage growth surpassed 3% for the first time since 2012 last quarter, and unemployment is back at a record low , the tight labour market has not been a major driver of the recent surge in inflation. In contrast to the US or New Zealand, wage …
18th November 2022
Unemployment rate to rise sharply next year Australia’s labour market held up well in October, consistent with our expectations for a near-term acceleration in wage growth and a further 100bps of rate hikes by the RBA. But we think employment will start …
17th November 2022
Broad-based strength in labour market and inflation to prompt 75bp hike next week Rates to peak at 5.0% by April With inflation set to drop back, RBNZ will cut rates in late-2023 With the labour market and inflation going from strength to strength and …
16th November 2022
Wage growth will peak at 3.5% by mid-2023 Wage growth climbed above 3% in Q3 for the first time since 2013 and we expect it to climb further to 3.5% by the middle of next year. The 1.0% q/q rise in hourly wages excluding bonuses was above the analyst …
Savings rate fell below pre-virus level in Q3 Comments by RBA Deputy Governor Bullock suggest that the risks to our above-consensus policy rate forecasts are shifting to the downside. Bullock noted today that the Bank is getting closer to the point where …
11th November 2022
The proposed price caps on thermal coal and natural gas would knock off around one to 1.25%-pts from overall inflation though the full impact would only materialise in the second half of next year. Wholesale gas and thermal coal prices have surged in …
8th November 2022
With inflation surprising to the upside in Q3, the Reserve Bank of Australia was forced to revise up its near-term forecasts for inflation in its latest Statement on Monetary Policy. (See Chart 1.) What’s more, the Bank’s forecasts were based on the …
7th November 2022
RBA increasingly worried about wage-price spiral The Reserve Bank of Australia lifted the cash rate by 25bp on Tuesday as we and most other analysts had anticipated and the marked upward revision to its inflation forecasts support our view that the Bank …
4th November 2022
Rebound in trade surplus won’t prevent drag from net trade in Q3 While the trade surplus bounced back in September, we’ve pencilled in a drag from net trade to Q3 GDP growth as export volumes probably didn’t rise fast enough to offset a surge in imports. …
3rd November 2022
Rebound in trade surplus won’t prevent drag from net trade While the trade surplus bounced back in September, we’ve pencilled in a drag from net trade to Q3 GDP growth. The rebound in the trade balance, from $8.7bn to $12.4bn in September, was well above …
Labour market strength adds to case for 75bp hike New Zealand’s labour market remained very tight last quarter and coupled with the continued strength in inflation. the RBNZ will probably hike by 75bp in a couple of weeks. The 1.3% q/q rise in employment …
1st November 2022
Labour market strength will encourage RBNZ to hike by 75bp this month New Zealand’s labour market remained very tight last quarter and coupled with the continued strength in inflation. the RBNZ will probably hike by 75bp in a couple of weeks. The 1.3% q/q …
The Reserve Bank of Australia hiked rates by 25bp today and the upward revision to its inflation forecasts are consistent with our view that rates will peak at an above-consensus 3.85%. However, we still see a good chance that policy will be loosened …
RBA will lift rates more sharply than most anticipate The Reserve Bank of Australia hiked rates by 25bp today and the upward revision to its inflation forecasts are consistent with our view that rates will peak at an above-consensus 3.85%. The Bank’s …
Largest price declines behind us but housing downturn not over yet The worst of the housing downturn is probably behind us but we still expect prices to fall by another 10% following the 1.1% m/m drop in October. While the 1.1% m/m drop in house prices …
Sales volumes running out of steam While retail sales kept rising for the ninth consecutive month in September, growth in volumes is slowing sharply and will remain subdued over coming quarters as real incomes fall and the savings rate returns to normal …
31st October 2022
Retail sales will come off the boil before long While retail sales kept rising for the ninth consecutive month in September, growth in volumes is slowing sharply and will remain subdued over coming quarters as real incomes fall and the savings rate …
Bank won’t make an about-face The stronger than expected Q3 inflation print has prompted some commentators to forecast a larger 50bp rate hike at next week’s RBA meeting following the step down from the four 50bp hikes in recent months to a smaller 25bp …
28th October 2022
Bank won’t make a U-turn and will opt for another 25bp hike next week But the upside surprise in Q3 inflation points to a higher peak in interest rates With GDP growth slowing sharply next year, we still expect rate cuts from late-2023 While the …
26th October 2022
Inflation will approach 8% by year-end Inflation was stronger than expected last quarter and will rise further in Q4. That’s consistent with our forecast that the Reserve Bank of Australia will hike rates more aggressively than most anticipate. The 1.8% …
Inflation hasn’t peaked yet The stronger-than-expected rise in consumer prices in Q3 is consistent with our forecast that the Reserve Bank of Australia will hike rates more aggressively than most anticipate. The 1.8% q/q increase in consumer prices last …
