Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Economic rebound means the RBNZ done easing The Bank has already slowed the pace of asset purchases We expect the Bank to end quantitave easing this year before hiking rates in 2022 Economic data since the Bank’s last meeting have shown the New Zealand …
17th February 2021
RBNZ cracks down on the housing market In April 2020, the RBNZ removed its existing LVR restrictions for housing loans which stipulated that banks could not lend more than 80% of loans to owner-occupiers with loan-to-value (LTV) ratios above 80% and no …
11th February 2021
While the exchange rate has strengthened sharply, goods prices are unlikely to fall. That should allow rising services prices to keep underlying inflation stable. Goods inflation rose to its highest rate in nearly 20 years at the end of 2020. One driver …
10th February 2021
With job losses during the pandemic concentrated in a handful of sectors and demand set to rebound as vaccines are rolled out, we think that the unemployment rate will fall to 5.5% by the end of this year. The virus has hit some industries much harder …
8th February 2021
RBNZ tightening looking more likely Just three weeks ago we unveiled our non-consensus forecast that the Reserve Bank of New Zealand would begin raising rates in 2022. Since then a string of positive data releases has confirmed our view that the economy …
5th February 2021
Retail Sales to ease from here The decline in retail sales in December largely just reflects the impact of Black Friday sales. Given the reopening of the Victorian economy in Q4 consumption probably still rose strongly in the quarter. Retail sales values …
Net trade to remain broadly neutral December’s rise in exports partly reflects higher commodity prices and with goods import volumes above pre-virus levels, we think that net trade won’t be a big contributor to GDP growth over coming quarters. The 2.8% …
4th February 2021
The recent surge in building approvals has largely been driven by the HomeBuilder Grant and probably won’t last. But with home sales soaring and house prices rising, dwellings investment should continue to recover even once HomeBuilder ends. Building …
3rd February 2021
We are more upbeat about the outlook for the economy than the Reserve Bank of Australia. But the RBA seems keen to err on the side of caution. With the latest extension of its QE programme already ending in August, we suspect the Bank will announce one …
Unemployment rate should continue to decline in 2021 The fall in the unemployment rate to 4.9% in New Zealand means the rate is already past the peak and we expect the labour market to continue to tighten throughout 2021. The 0.6% q/q rise in employment …
2nd February 2021
The RBA today upgraded its labour market forecasts but noted that the recovery remained dependent on “significant fiscal and monetary support”. Indeed, the Bank extended its Bond Purchase Program by another $100bn and indicated that it won’t raise …
Underlying inflation picked up strongly in New Zealand in Q4, with core inflation rising above the mid-point of the RBNZ’s 1-3% target band. That supports our view that the RBNZ will not cut rates further. But we expect strong house price growth and a …
1st February 2021
House prices to rise by 10% in 2021 House prices are already rising at a solid pace but forward indicators suggest that the pace of gains is set to increase in the months ahead. Across the eight capital cities, house prices rose by 0.7% m/m in January, …
Inflation set to rise further The 0.9% q/q rise in consumer prices in Q4 was much stronger than the RBA’s forecast of 0.5% q/q. That said, the pick-up in annual inflation was entirely driven by administered goods as child-care subsidies and a freeze in …
29th January 2021
RBA may choose to keep up with large asset purchases by overseas central banks But labour market doing much better than Bank had anticipated Balance of financial stability risks starting to shift as credit growth set to surge While the Reserve Bank of …
27th January 2021
Underlying inflation to strength this year The rise in inflation in Q4 was partly driven by volatile movements but we think inflation will rise in earnest before long. The 0.9% q/q rise in consumer prices in Q4 was higher than the consensus forecast of …
We now expect the RBNZ to tighten monetary policy in the years ahead as GDP growth, the labour market and inflation will be much stronger than the Bank has anticipated. We expect asset purchases to be wound down from this year before the Bank hikes rates …
26th January 2021
Our base case remains that the RBA will end quantitative easing in April. However, one risk to that forecast is the rising share of long-term unemployment. According to estimates by both the RBA and the OECD, the natural rate of unemployment rose after …
25th January 2021
Risks from JobKeeper phase out keep diminishing Even though the participation rate hit a fresh record-high, Australia’s unemployment rate fell to 6.6% in December. Across the fourth quarter, the unemployment rate has averaged 6.8%, far below the RBA’s …
22nd January 2021
Inflation to continue its rise in 2021 The sharp rise in underlying inflation in Q4 is consistent with our view that the RBNZ will tighten policy in the years ahead. Prices in Q3 rose 0.5% q/q, well above the analyst consensus or than the RBNZ’s latest …
21st January 2021
Unemployment Rate to continue to plunge The further decline in the unemployment rate in December is consistent with our view that the RBA will not extend its asset purchases beyond April. The 50,000 rise in employment was in December was exactly in line …
Overview - The recovery in GDP and employment in both Australia and New Zealand is set to continue surprising to the upside. As such, we expect the RBA to stop its QE programme in April. Meanwhile, we estimate that New Zealand’s economy has already …
18th January 2021
Australia has to rely on less effective vaccines We argued last week that Australia may vaccinate all vulnerable people by May, allowing most restrictions on activity to be relaxed. Indeed, Australia has ordered sufficient vaccine doses to inoculate its …
15th January 2021
Vaccine rollout to begin slightly earlier This week Prime Minister Scott Morrison revealed that the vaccine rollout may be brought forward to mid to late February. Mr Morrison said he hoped the Pfizer/BioNTech vaccine would be approved by the end of …
8th January 2021
Trade was a modest drag on growth in Q4 A surge in imports meant that the trade balance narrowed in November so we now think that trade was a modest drag on growth in Q4. The decline in the trade balance from $6583mn in October to $5022mn in November was …
7th January 2021
House prices may rise by 10% in 2021 House prices continue to rise strongly in Australia and we now think they will rise by 10% between the end of 2020 and the start of 2021. Across the eight capital cities, house prices rose by 0.9% m/m in December. …
4th January 2021
We estimate that the exports of goods and services that are already facing restrictions by China contribute around 1.8% to Australia’s GDP. While we still expect iron ore and liquefied natural gas exports to remain spared, that figure could rise to around …
23rd December 2020
The 7.9% q/q recovery in consumption in Australia in Q3 still left it 6.8% below pre-virus levels. Even excluding Victoria, consumption only recovered to around 4.5% below pre-virus levels. And since the huge stimulus payments continued and labour income …
22nd December 2020
Coal the latest victim of trade war with China Chinese steel mills and power plants were told to stop importing Australian coal at the start of October. More recently, China has relaxed coal import quotas for major power plants due to domestic supply …
18th December 2020
The fact that the government revised up its estimate for the underlying cash balance in 2020/21 by more than 1% of GDP since the October Budget underlines that the economy is recovering much faster than most had anticipated. The government’s GDP growth …
17th December 2020
Upside surprise is under way The fall in the unemployment rate to 6.8% in November leaves it on track to fall to 6% by the middle of next year and is consistent with our view that the RBA won’t expand quantitative easing any further. The 90,000 rise in …
Strong rebound sets the stage for solid 2021 The extraordinary rebound in New Zealand’s GDP was probably driven, in part, by the release of pent-up demand, but we still expect output to rise further in the months ahead. The 14.0% quarterly rise in …
16th December 2020
We think that the recovery from the pandemic will be stronger than most anticipate. That means that the labour market will tighten rapidly, allowing central banks to end their bond purchases. The upshot is that both the Australian dollar and the New …
Credit rating downgrade unlikely to lift bond yields S&P Global Ratings downgraded the credit ratings of New South Wales and Victoria this week from AAA to AA+ and AA respectively. Both states have held the prestigious AAA rating since 2003 and entered …
11th December 2020
The capital ratios of Australian banks may decline a bit as loan deferrals come to an end and other policy support is withdrawn. But with capital ratios having almost doubled since the GFC and underlying profitability sound, the banking sector won’t be a …
10th December 2020
Consumption set to rebound further The 3.3% q/q rebound in Q3 GDP was stronger than most had expected. The 7.9% q/q rise in consumption reversed half of the drop in Q3, but some sectors are still on their knees. For example, spending on accommodation …
4th December 2020
Rebound in retail sales to continue in November The rebound in retail sales in October is likely to be overshadowed by an even larger increase in November as Victoria reopens . The 1.4% m/m rise in retail sales values in October was smaller than the …
Trade won't big a big drag on growth again in Q4 The trade balance widened in October but the widening was partly driven by price effects so we estimate that net exports made little contribution to GDP growth in Q4. The rise in the trade balance from …
3rd December 2020
Output to return to pre-virus levels by Q2 2021 The rebound in Q3 GDP reversed around 40% of the decline during the first half of the year and we expect output to return to pre-virus levels by mid-2021. The 3.3% q/q rise in Q3 GDP was stronger than most …
2nd December 2020
The RBA still sounded cautious when it left policy settings unchanged today. But if our more optimistic forecasts for GDP growth and inflation are realised, the Bank may not decide to expand QE in April. The Bank kept both its cash rate target as well as …
1st December 2020
House prices may rise by 7% next year House prices are now rising in Australia and we reiterate our forecast that house prices will rise by 7% in 2021, though the risks look skewed to the upside. Across the eight capital cities, house prices rose by 0.8% …
New Zealand is likely to be one of the few countries where output had recovered to pre-virus levels in Q3. Taken together with the recent positive news on the vaccine, we no longer expect the RBNZ to cut rates into negative territory. New Zealand removed …
30th November 2020
We have been arguing for some time that the unemployment rate would not rise as much as most believed in either Australia or New Zealand. We remain confident in those forecasts. Admittedly, the unemployment rate rose from 4.0% to 5.3% in New Zealand in …
House prices ready to skyrocket Daily data from CoreLogic suggest house prices in Australia’s five largest capital cities have risen 0.9% from their trough in October. And leading indicators suggest prices may soar before long. Indeed, our sales to new …
27th November 2020
Australia and New Zealand will benefit less than other advanced economies from a vaccine due to their success in containing the virus. Even so, we’ve lifted our 2021 GDP growth forecasts a bit and no longer expect the RBA to expand quantitative easing …
26th November 2020
Capital investment may be approaching its trough We estimate that private investment fell by a modest 1.2% q/q in Q3, and firms’ expectations of future capital expenditure suggest we may be near the trough in investment . Today’s private capital …
Vaccine may be available by Q2 2020, allowing full reopening of the economy Labour market doing much better than Bank had anticipated Case for additional stimulus is diminishing The Reserve Bank of Australia won’t make any policy changes at its meeting on …
24th November 2020
RCEP won’t cool trade tensions Australia was one of 15 countries, including China, to sign the Regional Comprehensive Economic Partnership (RCEP) this week. Some analysts have expressed optimism that the signing of the deal would help cool the rising …
20th November 2020
The unemployment rate is past its peak The surge in employment in October largely preceded the relaxing of restrictions in Victoria so we expect that November data should show a further rise. The 178,800 rise in employment in October was much larger than …
19th November 2020
Annual wage growth should continue to ease The weakness in wage growth in Q3 was partly driven by the delay to the minimum wage increase but we still think overall wage growth will remain soft in the years ahead. The wage price index (WPI) showed wages …
18th November 2020
