Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The labour force survey overstates the strength of the recovery in employment because it doesn’t capture the plunge in the number of non-resident workers. However, their impact on the labour market isn’t as large as the headline figures suggest as they …
27th June 2021
Will vaccine supply hit a snag? The worsening outbreak of the delta variant in Sydney underlines that with just 4% of its population fully vaccinated, Australia isn’t out of the woods just yet. The vaccine campaign has accelerated in recent months, but …
25th June 2021
The surge in consumption in Q1 resulted in the savings rate falling to a 15-year low. While we expect households to respond to falling house prices with higher savings, the rebound in GDP could be even stronger than we currently assume if households keep …
24th June 2021
We now expect the unemployment rate to approach 4% by late-2022. Even though the reopening of the border should ameliorate staff shortages a bit next year, we expect wage growth to accelerate markedly. As such, we’re bringing forward our forecast for the …
23rd June 2021
Hawkish moves When RBA Governor Lowe stood up to give a speech on Thursday, markets were still digesting the hawkish shift from the US Fed that had come just a few hours before. The Fed’s move to add two rate hikes in 2023 to its projection took it ahead …
18th June 2021
We expect the RBNZ to impose new lending restrictions in the months ahead which, in addition to rising interest rates, should result in house prices declining next year. The median house price in New Zealand was up 32.3% y/y in May. Part of that was due …
17th June 2021
Extraordinary labour market recovery to continue The surge in employment in May demonstrates that the labour market is continuing its extraordinary rebound which supports our call for the RBA to move to a flexible asset purchase programme in July. The …
Solid rebound in activity to persist The solid rise in activity in Q1 means that New Zealand easily avoided a second technical recession and we expect GDP to continue its rebound over the rest of 2021. The 1.6% quarterly rise in production GDP was …
The RBNZ’s hawkish rate outlook has prompted us to bring forward our forecast for the first RBNZ rate hike from November to May next year. But in contrast to the RBNZ, we don’t think the pandemic will cause lasting damage to the labour market so we’ve …
14th June 2021
Victorian lockdown lifted The two-week lockdown in Victoria has now been lifted, two weeks earlier than we had expected. While social distancing restrictions will remain in place, consumers can now shop again, which will provide a meaningful boost to …
11th June 2021
We now expect the RBA to refrain from announcing a target for the overall amount of bond purchases at the July meeting while keeping the weekly pace of purchases unchanged at $5bn . A more flexible approach to bond-buying would make it easier for the Bank …
8th June 2021
Remarkable GDP bounce back The 1.8% rise in GDP in Q1 was much stronger than most had anticipated and more than enough to lift output to an all-time high. Indeed, with GDP now 0.8% above its pre-virus peak, Australia has been the best performing OECD …
4th June 2021
Drag from net trade may persist The trade surplus widened again in April but that was largely driven by higher commodity prices. Export volumes will need to recover further in the months ahead to prevent trade from being a drag on GDP growth yet again in …
3rd June 2021
We expect inflation to rise to the mid-point of the RBA’s target band over the next couple of years. The main driver is a continued tightening of the labour market and a pick-up in wage growth. By contrast, we think that the goods supply shortages …
2nd June 2021
Recovery set to slow as GDP already above pre-virus peak Australia's GDP surpassed its pre-virus level in Q1 but with the vaccination rollout still slow and a fresh lockdown in Melbourne, the recovery is set to slow . The 1.8% q/q rise in Q1 GDP was …
The Reserve Bank of Australia still sounded dovish when it kept policy settings unchanged today. We think it will expand its bond purchase program by another $100bn next month. The RBA’s decision to keep interest rates and the parameters of its bond …
1st June 2021
House prices may decline in 2022 House prices are surging but forward indicators point to growth slowing in the months ahead. Indeed, we suspect prices may decline a little in 2022. Across the eight capital cities, house prices rose by 2.3% m/m in May, …
Australian Treasurer Josh Frydenberg noted in October that the Government would not pursue budget repair until the unemployment rated was comfortably below 6%. However, the unemployment rate fell much more rapidly ahead of the May Budget than almost …
31st May 2021
Investment rebound offset by lockdown The whopping 9.1% rise in machinery and equipment investment in the private capital expenditure survey was more than enough to offset the small decline in non-residential construction in the building works done data. …
28th May 2021
Capital investment rebound to continue We estimate that private investment rose by 4.1% q/q in Q1 and firms’ expectations of future capital expenditure suggest the strong rebound in investment is set to continue in the months ahead. Today’s private …
27th May 2021
In the short-run, China has no choice but to grit its teeth and keep buying Australian iron ore, even as bilateral ties continue to fray . But this dependence will diminish over time thanks to increased supply from other sources, greater use of recycled …
26th May 2021
The Reserve Bank of New Zealand sounded more optimistic at today’s meeting and signalled that it will start to hike rates in the second half of next year, in line with our long-standing forecast. If anything, the risks are that the Bank tightens policy …
Dovish RBA set to extend asset purchases by another $100bn in July However, early signs that inflation is about to recover strongly We think RBA will start to lift interest rates in late-2023 The Reserve Bank of Australia will still sound dovish at the …
25th May 2021
Tighter labour market will eventually lift wages The end of the JobKeeper wage subsidy resulted in a modest fall in employment in April. But a renewed drop in the participation rate meant that the unemployment rate declined from an upward revised 5.7% to …
21st May 2021
Jobs growth to resume, but at slower pace While the economy shed some jobs after the JobKeeper wage subsidy scheme came to an end, the surge in vacancies suggests employment will keep rising over the coming months . The 30,600 decline in employment in …
20th May 2021
RBNZ will tackle soaring house prices by restraining credit rather than raising rates However, economy should continue to recover towards tightening threshold We still expect the RBNZ to hike rates in 2022 While the Bank will acknowledge the new house …
19th May 2021
Wage growth will rise further but still has a long way to go The strength in wage growth in Q1 was partly due to one-off factors which will fade in the year ahead, but we still think the tightening in the labour market will see wage growth rise in earnest …
The release of the federal Budget on Tuesday took centre stage this week. (See our Update .) But the more striking development was the surge in the price of iron ore to a record high of nearly US$240 per tonne. (See Chart 1.) Chart 1: Iron Ore & LNG …
14th May 2021
Treasurer Josh Frydenberg revealed in today’s Budget that the government will spend nearly all of the windfall accruing from the stronger economic recovery. That will result in a permanently larger role of the state and a sizeable structural budget …
11th May 2021
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
