Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Consumption may only return to pre-virus levels in second half The drop in real retail sales in Q1 suggests that the recovery in consumption slowed last quarter. And with the vaccination drive still slow, we think that consumption will only return to …
10th May 2021
RBA signals more support is required The Reserve Bank of Australia noted at this week’s policy meeting that it will decide whether to extend its bond purchases at its July meeting. And Deputy Governor Debelle noted yesterday that the decision will take …
7th May 2021
The closure of the border will reduce Australia’s potential output by around 2.5%. But this will be partly offset by higher productivity growth due to increased usage of technology and more employees working from home. And the usual red flags that have …
6th May 2021
While the government is likely to announce further tax relief at next week’s Budget, we suspect it will use nearly half of the recent improvement in the budget balance to reduce borrowing. Treasurer Josh Frydenberg will announce the Budget on Tuesday, 11 …
5th May 2021
Tighter labour market to herald RBNZ hikes next year The fall in the unemployment rate to 4.7% in New Zealand is consistent with our view that a continued tightening in the labour market will prompt the RBNZ to hike rates next year. The 0.6% q/q rise in …
The Reserve Bank of Australia upgraded its forecasts for GDP growth and inflation but reiterated that it is prepared to extend its asset purchases. We stick to our forecast of another $100bn extension in the Bank’s bond purchase program, though this would …
4th May 2021
Surge in headline inflation won’t last Consumer prices rose 0.6% q/q in Australia in Q1, well below the Bloomberg median forecast of a 0.9% q/q rise. And half of that rise was due to stronger fuel prices which meant that underlying inflation was subdued. …
30th April 2021
House prices are now surging in both countries. House price cycles in the Australian housing market tend to lag those in New Zealand a little, which is consistent with the forward indicators pointing to a rapid lift in the pace of annual Australian price …
29th April 2021
Stronger labour outturns largely offset by Bank’s lower estimate of natural rate Inflation very weak and set to pick up only slowly We expect a third $100bn round of QE and first rate hike only by end-2023 The Reserve Bank of Australia will revise down …
28th April 2021
Above target inflation won’t be sustained The weakness in underlying inflation in Q1 is consistent with our view that the Reserve Bank of Australia will announce a third $100bn round of asset purchases before long. And it suggests that the financial …
Consumption probably kept rising across Q1 The 1.4% m/m rise in retail sales values in March largely reflected the unwinding of lockdowns in Victoria and Western Australia. The bigger picture is that sales remained below their peak in November. Car …
23rd April 2021
New Zealand is playing with fire by criticising the human rights situation in China’s Xinjiang province. While China is highly dependent on New Zealand’s flagship dairy, meat and logs exports, it could impose restrictions on smaller product categories. We …
22nd April 2021
Continued strength in inflation will support rate hikes next year We think underlying inflation will remain close to the RBNZ’s target for the foreseeable future which supports our view that the RBNZ will hike rates next year. Prices in Q1 rose 0.8% q/q, …
21st April 2021
New Zealand’s experience suggests that the planned increase in risk-weightings for investor housing loans in Australia won’t act as a big deterrent to bank lending. If investor loan growth started to run hot, the banking regulator would have to respond …
19th April 2021
Households in a good position The RBA’s latest Financial Stability Review painted a rosy picture of financial stability risks. Household debt as a share of disposable income remained at a four-year low in Q4 despite the fall in incomes as stimulus was …
16th April 2021
Overview – The speed of the vaccination rollout has been disappointing and brief, localised lockdowns have set back the recovery in both countries. But vaccine supply should improve over the coming months which should allow those sectors still severely …
15th April 2021
Employment to keep rising even as JobKeeper ends The continued tightening of the labour market in March means that a further extension of quantitative easing isn't a done deal, but amid weak wage growth and inflation we still expect the RBA to press ahead …
The Reserve Bank of New Zealand (RBNZ) stuck to its dovish stance when it left policy settings unchanged today, but we still expect the Bank to raise rates towards the end of next year. As expected, the Bank did not adjust its policy rate or its asset …
14th April 2021
Travel bubble launch New Zealand’s government this week confirmed that a travel bubble with Australia will begin on 19 th April. As we previously discussed, the impact on GDP is likely to be small for both countries as the boost from increased spending in …
9th April 2021
RBNZ should shrug off second technical recession and keep policy unchanged The Bank’s new house price focus shouldn’t change the policy outlook We still expect the RBNZ to hike rates in 2022 New Zealand has probably experienced a second technical …
7th April 2021
The Reserve Bank of Australia stuck to its dovish stance despite the strength in recent data so we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank acknowledged the recent improvement in the global …
6th April 2021
Passing the buck House prices are surging in Australia. Prices rose 2.8% in March which translates to an incredible annualised pace of more than 30%. Housing finance commitments in February also point to annual price growth reaching 30% before long. (See …
1st April 2021
House price growth should ease later this year House prices are surging but forward indicators somewhat mixed and we suspect the pace of price growth will ease in the second half of this year. Across the eight capital cities, house prices rose by 2.8% m/m …
Trade may have been a drag on growth in Q1 Retail sales and the trade surplus declined in February but while we still expect consumption to rise in Q1, net trade may have been a drag on growth. The trade surplus narrowed in February from $9.6bn to $7.5bn …
RBA will remain committed to its bond yield target And should extend QE once more in June Market too bullish on rate hikes In recent weeks, the Reserve Bank of Australia has continued to push back against expectations of monetary tightening. We think the …
31st March 2021
More moves to slow house price growth We’ve expressed doubts over the ability of the RBNZ’s loan-to-value ratio (LVR) limits which were implemented at the start of the month to slow the pace of house price growth very much. (See here .) The government …
26th March 2021
Even if the long-rumoured Australia-New Zealand travel bubble does go ahead, it wouldn’t make a huge difference to either economy. We think the bubble would give a small boost to New Zealand’s GDP and be a small drag on Australia. A travel bubble between …
24th March 2021
Sharp fall in unemployment Australian employment surged in February despite brief localised lockdowns in some states. The 88,700 rise was enough to pull down the unemployment rate from 6.4% to 5.8%. That’s just 0.6 ppts higher than the pre-virus level and …
19th March 2021
Tightening in the labour market has further to run The surge in employment in February is consistent with our view that the Australian labour market is tightening much faster than most expect. The 89,100 rise in employment in February much stronger than …
18th March 2021
Second technical recession all but confirmed The solid decline in activity in Q4 means that a second recession is imminent as GDP is bound to decline in Q1. The 1.0% quarterly fall in production GDP was larger than the Bloomberg consensus of a 0.2% q/q …
17th March 2021
Housing finance commitments have surged in recent months pointing to a rise in credit growth before long. But we don’t think lending standards have been eroded so this shouldn’t stop the RBA from announcing an extension to its QE again in June. Household …
RBA defends yield target The sell-off in government bond markets in recent weeks resulted in a deterioration in liquidity conditions, with bid-ask spreads reaching the highest level since last year’s panic. (See Chart 1.) The Bank responded last Monday by …
12th March 2021
Today’s dovish speech by RBA Governor Lowe supports our view that the RBA is set to keep monetary policy accommodative for a long time to come. But concerns about the functioning of the bond market may force the RBA to stop QE by the end of the year. …
10th March 2021
The slow progress in rolling out vaccines in New Zealand means that its border may only be reopened by the end of this year. With net migration boosting population growth by around 1%-pt per annum before the virus struck, we’ve lowered our forecast for …
8th March 2021
RBA responding half-heartedly to soaring yields Bond yields declined at the beginning of the week as the RBA on Monday stepped up its purchases of longer-dated bonds for the first time since the launch of quantitative easing in November. The Bank bought …
5th March 2021
While Australia’s non-iron ore export volumes to China have slumped by 40% over the past year, coal miners have been able to divert their shipments to other countries. The upshot is that the conflict isn’t as damaging to Australia’s economy as many think. …
4th March 2021
Trade should support GDP growth in Q1 Retail sales and the trade balance rose in January and while we expect retail sales to be subdued in the months ahead, export values may have further to rise. The trade balance widened in January from $7133bn to a …
Output to return to pre-virus levels by middle of the year The 3.1% q/q rise in Q4 GDP left output just 1.1% below pre-virus levels and we think it will surpass that threshold by Q2. The increase in GDP was stronger than the Bloomberg median of 2.5% and …
3rd March 2021
The Reserve Bank of Australia today doubled down on its commitment to keep monetary policy settings loose and we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank kept its target for the cash rate and the …
2nd March 2021
Labour markets in both countries have tightened in recent months. In Australia, the unemployment rate has fallen from a peak of 7.1% to just 6.4% in January. And other measures of spare capacity have tightened even more sharply. The underemployment rate …
1st March 2021
House prices to continue rising this year House prices are now surging which poses an upside risk to our forecast that prices will rise 10% between January and December this year. Across the eight capital cities, house prices rose by 2.1% m/m in February, …
We doubt that the Reserve Bank of New Zealand’s new obligation to consider house prices will drastically change the outlook for monetary policy. But given that house price growth remains very strong, there is a risk that the Bank tightens policy earlier …
26th February 2021
Bond yields soaring to two-year high The key market theme this month has been the surge in long-term government bond yields. While that rise is partly driven by worries that another large stimulus package in the US will lift inflation, yields have risen …
Capital investment set to surge this year We estimate that private investment rose by 2.6% q/q in Q4, and firms’ expectations of future capital expenditure suggest investment is set to surge this year. Today’s private capital expenditure survey showed a …
25th February 2021
The financial markets have started to price in a rate hike as soon as early-2023 Labour market tightening but wage growth and inflation set to fall short of RBA’s targets We expect the first rate hike to be delayed until early-2024 and bond yields to fall …
24th February 2021
The Reserve Bank of New Zealand (RBNZ) sounded dovish when it left policy settings unchanged today, but we still expect the Bank to begin increasing rates next year. As expected, the RBNZ did not adjust the OCR or its asset purchase program at today’s …
Wage growth will need to strengthen much further for RBA to hike The jump in wages in Q4 was partly due to temporary wage cuts implemented during the pandemic unwinding, but it supports our view that wage growth will rebound more sharply than most …
Even though the unemployment rate is still as high as it was during the mining bust, job vacancies and the share of firms reporting staff shortages have surged. We suspect that this has been driven by a broad-based drop in labour mobility during the …
22nd February 2021
Short lockdowns unlikely to disrupt recovery Brief, localised lockdowns are increasingly becoming the norm in Australia and New Zealand as officials seek to contain outbreaks, particularly given concerns about more infectious strains of the virus. But the …
19th February 2021
Unemployment to keep falling rapidly While employment growth slowed in January, it should remain strong enough to lower the unemployment rate to 5.5% by the end of this year . The 29,100 rise in employment in January was a bit weaker than the consensus of …
18th February 2021
