Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
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
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 …
