Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
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
Output won’t return to pre-virus trend The US elections sent the ASX 200 to fresh highs last week as the prospect of a divided US government means that several measures proposed by president-elect Joe Biden are off the table . And it has risen further …
12th November 2020
The Reserve Bank of New Zealand’s (RBNZ) decision to implement a funding for lending programme in December should provide some further stimulus on its own and is another step towards implementing negative rates in 2021. The Bank did not adjust the OCR or …
11th November 2020
While card transaction data have overstated the health of consumer spending in recent years, we suspect they didn’t do so recently. As such, we’re willing to take the jump in transaction amounts in Q3 at face value and have pencilled in a strong rise in …
9th November 2020
China tensions continue to bubble Trade data this week suggest that trade was a big drag on Australia’s GDP growth in Q3, though that’s largely because the rebound in domestic demand lifted imports. And despite mounting trade tensions with China, exports …
6th November 2020
Economic data have been mixed but generally support further easing RBNZ to launch lending programme to lower funding costs RBNZ to cut OCR to -0.25% in April and hold rates steady thereafter At its meeting on 11 th November, the Bank will likely unveil a …
5th November 2020
Trade may a remain a drag on growth in the coming months The widening of the trade balance in September was not enough to prevent trade from being a significant drag on growth in Q3. The rise in the trade balance from $2617mn in August to $5629mn in …
Rebound in consumption has much further to run The strong rebound in retail sales in Q3 was probably matched by a rebound in services consumption and has further to run as Victoria reopens . The 1.1% m/m drop in retail sales values in September was …
4th November 2020
Unemployment rate won’t rise as much as most believe The rise in the unemployment rate to 5.3% in New Zealand in Q3 means the unemployment rate is close to its peak and we expect the labour market to tighten next year. The 0.8% q/q decline in employment …
3rd November 2020
The RBA didn’t disappoint when it cut interest rates and launched quantitative easing today. And even though it turned more optimistic about the economic outlook, we suspect it will expand its government bond purchases beyond the planned six months . The …
House prices may rise by 7% next year Australia’s housing downturn came to an end last month and we reiterate our forecast that house prices will rise by 7% in 2021, led by Sydney. Across the eight capital cities, house prices rose by 0.4% m/m in October. …
2nd November 2020
Inflation holding up better than expected The 1.6% q/q jump in consumer prices in Q3 was largely due to the reversal of the government’s free childcare policy and on its own tells us very little about the broader inflation picture. More importantly, …
30th October 2020
As restrictions have been lifted in both countries, activity has rebounded. Admittedly, the second draconian lockdown in Victoria will hold back the recovery in GDP in Australia in Q3 and Q4. But we expect the pace of recovery to pick up in the first half …
29th October 2020
Underlying inflation to remain subdued The surge in quarterly inflation in Q3 only unwound some of the weakness in Q2 and we still expect underlying inflation to remain weak for years to come. The 1.6% q/q rise in consumer prices in Q3 was the largest …
28th October 2020
Cash rate target, three-yield target and TFF interest rate to be lowered to 0.10% Interest rate on Exchange Settlement balances to remain at 0.10% Quantitative easing is coming and the Bank may buy $150bn in government bonds The Reserve Bank of Australia …
Minutes reiterate dovish message The minutes of the RBA’s meeting on 6 th October largely sent the same message as Governor Lowe’s speech a week alter. However, there are two points worth highlighting. First, the Board discussed lowering the targets for …
23rd October 2020
Inflation to ease further in the months ahead The further easing in headline and underlying inflation in Q3 are consistent with our view that weak inflation will prompt the RBNZ to cut rates into negative territory next year. Prices rose by 0.7%q/q in Q3, …
The RBA’s assets will rise further over the coming months as banks draw down funding under the TFF. But so will the assets of other central banks. If the Bank wanted to catch up with the advanced economies’ most expansionary central banks, it would need …
21st October 2020
RBA doubles down on inflation commitment RBA Governor Phillip Lowe gave a speech this week outlining how the Bank can deliver more easing. One change he unveiled was to the RBA’s forward guidance. In recent meetings, the Bank has said that it won’t raise …
16th October 2020
Overview - Australia and New Zealand have had far greater success in containing the virus than most other large advanced economies. Coupled with huge fiscal support, that means that the recovery in economic activity could surprise to the upside next year. …
15th October 2020
Fall in employment unlikely to last The drop in employment in September was largely due to weakness in Victoria. As restrictions ease there, we expect the unemployment rate to fall again in the coming months. The 29,500 fall in employment in September was …
Big budget spend up Josh Frydenberg unveiled the 2020/21 Budget on Tuesday announcing nearly $100bn of additional stimulus measures. Of particular note, the Budget brought forward stage 2 of the tax cuts to June 2020 (to be back-dated), introduced a 100% …
9th October 2020
