Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
A renewed tightening of the labour market next year means that wage growth will accelerate further. That pick-up will be underpinned by a stronger minimum wage hike, the lifting of caps on public sector wage growth and more employees switching jobs. And …
21st October 2021
Surging inflation will add fuel to RBNZ hiking cycle While we think the surge in inflation will start to abate in the year ahead, the strength will surely be worrying the RBNZ, supporting the case for further rate hikes. Consumer prices rose 2.2% q/q in …
18th October 2021
Doubling migration would rebuild the population The fresh New South Wales premier Dominic Perrottet has received advice that Australia should double its pre-virus level of migration to offset the recent weakness in population growth. The border closure …
15th October 2021
Overview – Domestic demand is set to rebound from recent lockdowns and labour markets should remain tight. Meanwhile, soaring energy and food prices will keep inflation high for a prolonged period. To be sure, the Reserve Bank of Australia won’t respond …
14th October 2021
Unemployment rate to fall towards 4% next year While employment plunged yet again in September, hours worked started to rebound and the end of lockdowns will result in a rapid recovery in the labour market over coming months. The 138,000 fall in …
Australia’s exports to China are even more vulnerable to a slowdown in the property sector than they were before the trade spat as iron ore has gained in importance. We think that China’s steel demand will fall before long and even if it doesn’t, a shift …
13th October 2021
The RBNZ hiked rates by 25bp this week even as the RBA still sounded dovish. The near-term outlook for both economies is similar. Both are emerging from prolonged lockdowns with around 80% of the eligible population having received one jab and more than …
8th October 2021
The RBNZ’s decision to begin its hiking cycle while Auckland is still in lockdown highlights that the New Zealand economy is on the brink of overheating. And as restrictions ease, we think the Bank will continue hiking rates in the months ahead. Today’s …
6th October 2021
The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already . As universally anticipated, the Bank kept its interest rate and asset …
5th October 2021
Record trade surplus to support growth The record trade surplus in August came despite the plunge in iron ore prices in August. The upshot is that net trade should provide a boost to GDP growth in Q3 as domestic demand weakens. Export values of goods and …
Rising living costs will eventually worry RBA We brought forward our forecast for the Bank of England’s first rate hike from 2023 to 2022 last week as second-round effects of higher commodity prices have started to emerge. A similar story is unfolding in …
1st October 2021
House price growth will ease in 2022 House prices have continued to surge despite the recent lockdowns. But we expect house price growth to slow next year as affordability constraints bite and macroprudential limits are imposed. Across the eight capital …
The RBA expects headline inflation to drop back from 3.8% in Q2 to 1.5% by mid-2022. By contrast, we now only expect it to fall to 2.5% over this period, reflecting the pass-through from soaring coal, gas and food prices. We also expect the recent …
30th September 2021
New Zealand has eased its strict lockdown RBNZ still keen to lift rates in October Rates will be gradually raised to 1.50% by the middle of next year New Zealand has slowed the spread of the Delta variant and eased its lockdown, which stopped the RBNZ …
29th September 2021
Labour market should cope well with impact of lockdowns Slump in net migration means that staff shortages won’t ease soon Wage growth still set to accelerate next year, paving way for rate hikes in early-2023 With the latest lockdowns set to end next …
28th September 2021
Rising house prices threaten financial stability The 17.4% annual rise in house prices in August was the strongest in nearly two decades and prices are set to rise the most since the 1980s by year-end. A speech by RBA Assistant Governor Bullock this week …
24th September 2021
High and rising household debt in Australia and New Zealand will limit central banks’ scope to hike interest rates. The upshot is that we expect the RBNZ to hike rates by a modest 125bp in the tightening cycle set to start next month, while the RBA’s …
23rd September 2021
Soaring shipping costs will exacerbate the impact of the weaker exchange rate on import price inflation. Indeed, we expect underlying inflation to return into the RBA’s 2-3% target next year. “Core” consumer goods prices rose by a subdued 0.3% q/q in Q2, …
20th September 2021
Solid GDP consistent with October rate hike The 2.8% rise in New Zealand’s production GDP in Q2 nearly returned output to its pre-virus trend. That’s an incredible achievement given the slump in net migration and that foreign tourists were just 14% of …
17th September 2021
Labour market to approach full employment by end-2022 Employment plunged by 1.1% m/m in August, but we still think that the unemployment rate won’t surpass it pre-Delta level over the coming months even as the participation rate rebounds . The 146,300 …
16th September 2021
Plunge and a rebound ahead The strength in activity in Q2 was partly driven by the travel bubble which burst in Q3 as New Zealand went into lockdown. While we expect domestic demand to recover toward the end of the year, services trade may not rebound as …
We doubt that any independent review of Australia’s monetary policy framework would result in a change to the RBA’s 2-3% inflation target. But the Bank could be forced to put more emphasis on house prices, reduce the frequency of Board meetings, and …
15th September 2021
New South Wales poised to reopen in October This week New South Wales (NSW) Premier Gladys Berejiklian laid out her plan for the state to begin to ease Covid-19 restrictions. We already knew that reopening would hinge on 70% of the adult population …
10th September 2021
Economic activity in New Zealand took a significant hit as the country was plunged into its strictest level of lockdown in August. But New Zealand’s success at taming the virus means output should return to its pre-Delta path by Q1 and the RBNZ will begin …
9th September 2021
While the RBA pressed ahead with tapering its asset purchases today, the financial markets are too optimistic in pricing in rate hikes as soon as next year . The RBA kept its interest rate targets unchanged at 0.10% as widely anticipated, but the more …
7th September 2021
Delta undefeatable in Australia Victoria joined New South Wales (NSW) in abandoning the zero-Covid strategy this week, declaring the Delta Variant ‘undefeatable’. Even so, the state government opted not to meaningfully ease restrictions. Instead, the …
3rd September 2021
Trade should support growth in Q3 The record trade surplus in July was largely driven by stronger commodity prices which won’t last. But we expect weaker domestic demand to weigh on imports over the coming months which should see trade make a positive …
2nd September 2021
Acceleration in vaccine rollout means lockdowns unlikely to last much longer RBA will probably press ahead with tapering However, Bank unlikely to tighten as early as next year as financial markets expect The health situation in Australia continues to …
1st September 2021
Output to plunge in Q2, but recession unlikely The further rise in GDP in Q2 was broadly in line with the RBA’s expectations and we suspect the Bank will press ahead with tapering its asset purchases this month . The 0.7% q/q rise in output marked a …
Lockdowns weighing on house price growth The drag from the current lockdowns on the housing market won’t last, but we expect house price growth to slow in earnest next year as affordability constraints bite. Across the eight capital cities, house prices …
NSW easing a damb squib Yesterday’s announcement by New South Wales (NSW) that it will ease restrictions for fully vaccinated people was disappointing. Sydney residents in areas under a curfew will be allowed to have a picnic from mid-September, but that …
27th August 2021
Sales will fall further before rebounding The decline in retail sales in July highlights the impact that lockdowns are having on the Australian economy. And with lockdowns spreading and intensifying in August, sales will fall further before they rebound. …
New Zealand has entered a draconian lockdown and new infections continue to rise. The lockdown prompted the RBNZ to refrain from hiking interest rates at its August meeting and financial markets were only pricing in a 50% chance of a rate hike in October …
26th August 2021
Firms still keen to invest when lockdowns ease We estimate that private investment rose by 1.5% q/q in Q2 and firms’ expectations of future capital expenditure suggest firms are still keen to invest when lockdowns ease. Today’s private capital expenditure …
The recent reimposition of the strictest level of lockdown in New Zealand was enough to prevent the RBNZ from hiking rates in August. And our assumption that restrictions will now remain in place until near the end of this year means we now expect the …
20th August 2021
Lockdown upends RBNZ’s plans In contrast to what most had expected, the RBNZ didn’t become the first central bank in an advanced economy to hike interest rates after the pandemic at Wednesday’s meeting. The statement made it clear that the Bank was keen …
Falling unemployment rate should keep RBA on track The further decline in the unemployment rate in July may not last long, but it should be more than enough to convince the RBA to proceed with its plans to taper asset purchases in September. The 2,200 …
19th August 2021
The RBNZ sounded hawkish when it left rates on hold today, but the decision demonstrates that the Bank is taking a cautious approach in light of the current lockdown. Assuming restrictions can be eased before long we still expect the Bank to hike rates to …
18th August 2021
Sluggish wage growth means RBA won’t hike next year The subdued 0.4% q/q rise in the wage price index in Q2 underlines that the tight labour market didn’t generate large cost pressures even before the latest virus restrictions. That increase marked a …
Lockdowns multiply The outbreak of the delta variant in Australia continues to worsen. Daily cases reached a new high in New South Wales (NSW) this week. And the re-emergence of cases in Victoria, Queensland and ACT has forced each state to re-enter …
13th August 2021
The New Zealand economy is now overheating The RBNZ will hike rates by 50 basis points in August OCR may reach 1.50% by the middle of next year The New Zealand economy is clearly overheating and the Bank’s mandates for both inflation and the labour market …
11th August 2021
New Zealand economy running hot New Zealand’s unemployment rate plunged from 4.6% to 4.0% in Q2, matching its pre-virus low. By contrast, the RBNZ had expected the unemployment rate to remain at 4.7% for more than a year. And unlike in Q1, other …
6th August 2021
The Reserve Bank of Australia signalled today that it’s unlikely to reverse the tapering of its bond purchases even as Sydney’s virus outbreak is getting worse. We still expect the tight labour market to deliver stronger wage growth and inflation than the …
Headwind from net trade won’t last much longer Given that most of the rise in exports last quarter was driven by higher commodity prices, net exports probably provided another big drag on GDP growth in Q2 . But we think that won’t last much longer. …
5th August 2021
While the unemployment rate is now back at its pre-virus low, a range of indicators suggest that there is still some slack in the labour market. We think the unemployment rate may eventually fall to 3.5%. However, mounting staff shortages will act as a …
Consumption will decline in Q3 The decent rise in real retail sales last quarter is consistent with a further rise in consumption in Q2. But given the lockdowns in Q3, we expect consumption to decline before long. The 1.8% m/m decline in retail sales …
4th August 2021
Low unemployment rate locks in RBNZ rate hike The decline in the unemployment rate to 4.0% all but confirms our forecast that the RBNZ will hike rates at its August meeting. The 1.0% q/q rise in employment was above the Bloomberg median forecast of a 0.7% …
The Reserve Bank of Australia delivered a hawkish surprise by not delaying the tapering of its bond purchases. And by predicting that it will hit its full employment mandate and make further progress towards its inflation target, it has opened the door …
3rd August 2021
House prices boom not over yet House prices are continuing to surge and forward indicators suggest the upswing has a little further to run. Even so we think house price growth will slow in 2022. Across the eight capital cities, house prices rose by 1.6% …
2nd August 2021
With new virus cases hitting fresh highs this week, Sydney’s lockdown has been extended until end-August and looks set to last for months given the high transmissibility of the Delta variant. Melbourne also briefly re-entered lockdown this month, though …
30th July 2021
