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The Treasurer resisted the temptation to spend the tax windfall from high commodity prices in today’s Budget. But with high inflation lifting payments by at least as much as receipts, the government now expects a larger structural deficit. The resulting …
25th October 2022
Minutes signal RBA not done yet The RBA this week signalled that even though it slowed the pace of tightening at its last meeting, it is not done yet. In a speech on Wednesday, Deputy Governor Bullock showed that the higher frequency of the RBA’s policy …
21st October 2022
Economists from our ANZ and Global Markets teams were online shortly after the release of Q3 CPI data for a 20-minute briefing in which they answered client questions and addressed key issues, including: Whether higher interest rates will push the …
20th October 2022
The continued strength in inflation will encourage the Reserve Bank of New Zealand to hike the overnight cash rate by 75bp in November and to 5.0% by mid-2023. And with the financial markets sharply repricing the peak in the cash rate, a further surge …
Unemployment rate will remain low for now Australia’s labour market is starting to sputter but with unemployment set to remain low, the RBA will continue to hike interest rates. The number of employed people rose by just 900 last month, well below the …
Strong inflation will prompt further rapid tightening The much stronger than expected rise in consumer prices in Q3 will encourage the Reserve Bank of New Zealand to hike rates by another 50bp at its November meeting and poses upside risks to our view …
17th October 2022
Strong inflation will prompt further rapid hikes The much stronger than expected rise in consumer prices in Q3 will encourage the Reserve Bank of New Zealand to hike rates by another 50bp at its November meeting and poses upside risks to our view that it …
Australia’s record housing downturn may not result in dwellings investment falling quite as sharply as we’re anticipating. However, the largest wealth destruction in Australia’s modern history poses downside risks to our forecast of a 2.5% rise in …
RBA flags higher neutral interest rate (sort of) This week’s speech by Reserve Bank of Australia Assistant Governor Luci Ellis on the neutral interest rate was an odd affair. The last time the Bank published an estimate of the neutral rate was in 2017, …
14th October 2022
We expect the aussie and the kiwi to weaken further against the US dollar and trough around mid-2023. And while we don’t expect the aussie to outperform the kiwi as it has recently, we think it will largely cling on to its recent gains and expect the …
12th October 2022
Overview – Soaring interest rates and falling real incomes will result in a more pronounced slowdown in economic activity in both countries than most anticipate. In fact, we now expect New Zealand to enter a recession next year as the RBNZ will hike …
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
Bank not done tightening yet Following the RBA’s surprise decision to hike the cash rate by 25bp instead of the 50bp widely anticipated, the financial markets now price in a peak of 3.6% by mid-2023 instead of 4.2% just before the meeting. Some …
7th October 2022
Export revenue will fall further The further fall in the trade surplus in August largely reflects a plunge in export prices and net trade should still provide a small boost to Q3 GDP. But with commodity prices now clearly down from their peak, export …
6th October 2022
The Reserve Bank of New Zealand hiked the overnight cash rate by 50bp to 3.5% as widely anticipated and the hawkish tone of the statement is consistent with our forecast that rates will peak at 4.5% by mid-2023. However, that aggressive tightening will …
5th October 2022
RBNZ will hike all the way to 4.5% The Reserve Bank of New Zealand hiked the overnight cash rate by 50bp to 3.5% as widely anticipated and the hawkish tone of the statement is consistent with our forecast that rates will peak at 4.5% by mid-2023. For a …
The Reserve Bank of Australia slowed the pace of monetary tightening by delivering a smaller 25bp rate hike to 2.60% this month, but we still expect rates to peak a touch higher than most anticipate. And the financial markets are now coming round to our …
4th October 2022
Rates may peak at 3.6% by early-2023 The Reserve Bank of Australia slowed the pace of monetary tightening by delivering a smaller 25bp rate hike this month, but we still expect rates to peak a touch higher than most anticipate. The Bank’s decision to slow …
Worsening affordability weighing on housing market Australia’s house prices have now fallen by 5% since the start of the current downturn and rapidly worsening affordability suggests they will fall by another 10%. The 1.4% m/m drop in house prices across …
3rd October 2022
Budget deficit will continue to narrow The Treasurer confirmed this week that the deficit in the underlying cash balance in 2021/22 narrowed to just 1.4% of GDP instead of the 3.5% predicted in the March budget, which was the largest forecast miss …
30th September 2022
To early to declare victory on inflation The inaugural release of Australia’s Monthly CPI Indicator showed that inflation eased a bit in August, though we still expect it to approach 8% in Q4. Meanwhile, the first drop in job vacancies since last year’s …
29th September 2022
Inflation hasn’t peaked yet The inaugural release of Australia’s Monthly CPI Indicator showed that inflation eased a bit in August, though we still expect a surge in utilities prices to lift inflation closer to 8% this quarter. The Australian Bureau of …
Resilient activity and faster food inflation point to another 50bp hike next week Inflation set to remain stubbornly high We now expect rates to peak at 4.5% by April 2023; first rate cut only by end-2023 With GDP growth holding up and food inflation …
28th September 2022
Resilience in consumption will prompt RBA to keep tightening aggressively The eight consecutive rise in retail sales in August will convince the RBA to hike rates by another 50bp at next week’s meeting. And with the savings rate still well above pre-virus …
Resilience in consumption will encourage RBA to continue tightening aggressively The eight consecutive rise in retail sales in August will convince the RBA to hike rates by another 50bp at next week’s meeting. The 0.6% m/m increase in retail sales values …
Early signs that tighter policy is working but RBA will hike by 50bp next week Consensus catching up to our long-held view that rates will reach 3.6% Absence of wage-price spiral means RBA will be able to loosen policy next year Other analysts are …
27th September 2022
Aussie falls to our year-end forecast With the Fed delivering a hawkish 75bp rate hike by signalling that it will continue tightening aggressively, the Australian dollar has slumped to US$0.66, on par with our end-year forecast. The exchange rate …
23rd September 2022
The 1.7% q/q rise in New Zealand’s production GDP and the 0.9% q/q rise in Australia’s GDP in Q2 were among the strongest increases among major advanced economies. (See Chart 1.) However, GDP growth will slow sharply over coming quarters. Recent output …
22nd September 2022
Despite incurring a record loss last year and now having to operate with negative equity, the RBA has not requested a recapitalisation from the government. But given that it did receive a capital injection in 2013 and that it may well record further …
21st September 2022
Hawkish signals from Lowe tilt the balance The release of stronger-than-expected US inflation figures on Tuesday prompted a small repricing of market expectations for the upcoming RBA meeting in October Markets now price in around a 50% chance of …
16th September 2022
Unemployment rate will yet fall a bit further While the first rise in Australia’s unemployment rate since last year’s Delta lockdown should be followed by a renewed fall, it will encourage the Reserve Bank of Australia to slow the pace of tightening to …
15th September 2022
Unemployment rate may yet fall a bit further While the first rise in Australia’s unemployment rate since last year’s Delta lockdown should be followed by a renewed fall, it will encourage the Reserve Bank of Australia to slow the pace of tightening to …
GDP growth will slow sharply as higher interest rates bite Despite a large rise in Q2, New Zealand’s GDP remains well below its pre-virus trend and that shortfall will widen as the surge in interest rates weighs on activity. The 1.7% q/q rise in …
The continued resilience of the economy means that the RBA will have to raise rates more sharply than most expect, which in turn will result in a more severe slowdown in activity than widely anticipated. However, the more benign nature of the recent …
14th September 2022
Reopening boom will soon run its course The 0.9% q/q rise in Australia’s Q2 GDP was weaker than our forecast of 1.5% q/q. To be sure, that was partly due to a huge drag from inventories. In fact, the 2.2% q/q jump in consumption was even stronger than …
9th September 2022
Trade surplus has peaked The record fall in Australia’s trade balance partly reflects bad weather that held back coal exports, but the recent fall in the iron ore price hasn’t …
8th September 2022
Lower iron ore price to weigh on export values The biggest fall in Australia’s trade balance in history partly reflects bad weather that held back coal exports, but the recent fall in the iron ore price hasn’t fully fed through so export values will …
GDP growth will slow over coming quarters The 0.9% q/q rise in Australia’s Q2 GDP was broadly in line with the RBA’s expectations and won’t move the needle in terms of the size of the next rate hike. That result was a touch below the analyst consensus of …
7th September 2022
GDP growth will slow sharply over coming quarters The 0.9% q/q rise in Australia’s Q2 GDP was broadly in line with the RBA’s expectations and won’t move the needle in terms of the size of the next rate hike. That result was a touch below the analyst …
The RBA lifted rates by 50bp today and dropped some hints that further tightening will be less aggressive . Even so, we still expect the Bank to hike rates more aggressively over coming months than most expect, which will weigh heavily on activity and …
6th September 2022
RBA will slow pace of tightening before long While the RBA hiked rates by 50bp today as widely anticipated, it dropped some hints that further tightening will be less aggressive. The Bank’s decision to hike the cash rate by 50bp was correctly anticipated …
GDP growth to slow further over coming quarters The partial GDP data released over the last couple of days suggest that GDP growth was much weaker last quarter than we had anticipated. With the housing downturn now starting to bite, it will slow to a …
Jobs summit tweaks migration goalposts The headlines were dominated by the Jobs Summit this week, where the Labor government announced that it will lift the 2022/23 cap on the annual number of permanent migrants from the current 160,000 to 195,000. …
2nd September 2022
Capital spending will rebound over coming quarters The continued rise in machinery and equipment investment in Q2 won’t offset a plunge in construction investment, but firms’ optimistic capital plans suggest this will prove short-lived. Today’s capital …
1st September 2022
Capital spending to rebound over coming quarters The continued rise in machinery and equipment investment in Q2 won’t offset a plunge in construction investment, but firms’ optimistic capital plans suggests this will prove short-lived. Today’s capital …
Plunge in affordability to result in further strong price falls House prices are falling at the fastest pace in four decades. While leading indicators of housing market activity remain consistent with a mild downturn, rapidly worsening affordability due …
Australia consumers going from strength to strength while inflation remains high Bank to hike rates by 50bp in September before reverting to smaller 25bp hikes Slump in house prices and slowdown in inflation to prompt cuts next year With the …
30th August 2022
Reopening boom to last for a while yet Not only did retail sales rise for the seventh consecutive month in July, the strong size of the increase strongly suggests that the Reserve Bank of Australia will hike rates by another 50bp next month. The 1.3% m/m …
29th August 2022
