Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The RBA sounded cautiously optimistic when it left policy settings unchanged today, but we still think that it will expand government bond purchases soon. The RBA surprised no one by keeping both the target for the cash rate and the target for 3-year …
2nd June 2020
Australia’s gross government debt/GDP ratio will hit the highest level since WWII by 2022/23. While the budget deficit will narrow again over the coming years as tax revenues rebound and stimulus measures expire, it will remain consistent with rising debt …
1st June 2020
House prices have further to fall We think the small decline in house prices in May marks the start of a larger downturn. We expect house prices to fall by 5-10% in the coming months. House prices across the eight capital cities fell by 0.2%m/m in May, …
As the lockdowns have largely come to an end in both countries, output is starting to recover. In New Zealand, most activity is now allowed to resume, though gatherings are limited to 100 people. In Australia, states are easing restrictions at different …
29th May 2020
Slump in revenue will widen budget shortfall The Treasury last week discovered that many of the firms applying for its JobKeeper wage subsidy had filled out the application form wrongly. As a result, the Treasury now estimates that only 3.5mn workers …
Capital investment to plunge over the coming year We estimate that private investment was broadly flat in Q1, but firms’ expectations of future capital expenditure point to a sharp downturn in investment in the coming months. Today’s private capital …
28th May 2020
Previous government bond purchases were focused on restoring liquidity Unemployment is rising and inflation set to slump Bank may launch fresh round of purchases focused on lowering long-term rates We suspect that the Reserve Bank of Australia will keep …
26th May 2020
Record slowdown in retail spending The preliminary estimate of a 17.9% m/m fall in retail spending in April marked the steepest decline on record. But that fall overstates the weakness in retail spending. Given retail sales spiked by 8.5% m/m in March, …
22nd May 2020
Investors are not increasing their demand for housing and even if they did, owner-occupiers account for 70% of overall housing demand. The upshot is that investors won’t prevent house prices from falling 5-10% in the coming months. Some commentators have …
20th May 2020
Unemployment may not rise all that much The 4.6% m/m fall in employment in April was broadly in line with our forecast, but due to an unprecedented slump in the participation rate, the unemployment rate only rose from 5.2% to 6.2%. Over the coming months, …
15th May 2020
The additional $16bn of spending in today’s Budget along with a relatively fast relaxation of the Covid-19 restrictions should reduce the number of job losses in New Zealand. Add in a sharp reduction in labour force participation, and we now think the …
14th May 2020
Unemployment rate set to approach 10% The small rise in the unemployment rate in April masks a sharp fall in employment and we still expect the unemployment rate to rise further over the coming months . The 594,000 fall in employment in April was broadly …
The Reserve Bank of New Zealand (RBNZ) massively expanded its annual target for asset purchases at its meeting today and we still think the Bank will cut rates into negative territory before long. The Bank’s decision to keep rates on hold at 0.25% was …
13th May 2020
Wage growth set to slow sharply The stability in wage growth in Q1 tells us little about the impact of the virus outbreak on the labour market and a sharp slowdown over the coming quarters is likely . The cutoff date for the Q1 wage price index survey was …
The border closure will result in a collapse in revenue from foreign tourists and a marked fall in revenue from foreign students in Q2. And while the government will probably allow foreign students to enter the country before long, tourism revenue is set …
12th May 2020
Government expects return to normality by July PM Morrison outlined the government’s three-stage plan to restart the economy on Friday. In the first stage, schools will reopen and restaurants and cafes will be able to serve up to 10 people at a time. In …
8th May 2020
Economic activity in New Zealand has started to rebound after its severe lockdown has come to an end. But there are a number of reasons why output won’t return to normal anytime soon. New Zealand moved from a severe level 4 lockdown that restricted …
7th May 2020
Surge in exports won’t last long The massive rebound in exports in March is hardly surprising given the impact of a cyclone in February but we think weakness in global demand will weigh on export growth in the coming months. The rise in the trade balance …
The lockdown hit the New Zealand economy hard RBNZ is supporting the economy with QE and other measures but more is needed The RBNZ will cut the OCR into negative territory, perhaps in August The RBNZ will want to wait to assess the impact of the virus …
6th May 2020
Consumption to slump in Q2 A large share of the surge in retail sales values in Q1 reflected soaring prices and sales volumes only rose modestly. With spending on many services plummeting, consumption probably fell in Q1. And with the lockdowns starting …
Unemployment rate will surge in Q2 The small rise in the unemployment rate to 4.2% in New Zealand in Q2 largely predates the impact of Covid-19 on the New Zealand economy. We expect the unemployment rate to surge in Q2 as the lockdown weighs on the labour …
The Reserve Bank of Australia (RBA) today left its interest rate targets unchanged but an easing of collateral requirements should provide some support to corporate bond markets. While the financial markets expect the Bank to hike rates in about three …
5th May 2020
The closure of the border will reduce Australia’s potential GDP growth by as much as 1% for as long as it lasts. What’s more, it seems likely that net migration will be lower than before the virus outbreak even if the border reopens. And by reducing …
4th May 2020
The strict lockdowns have resulted in a massive drop in demand, but they have also been successful at ‘flattening the curve’ or reducing the number of new daily cases of Covid-19 in both countries. (See Chart 1.) The success means both countries are now …
30th April 2020
Many states starting to lift restrictions With the number of new coronavirus cases across Australia having fallen from nearly 400 per day in late-March to around 15 over the past week, several Australian states have started to ease their lockdowns. …
Underlying inflation to fall towards 0% soon Inflation was accelerating ahead of the virus outbreak but the surge in spare capacity should push underlying inflation below 1% over the coming quarters . The 0.3% q/q rise in consumer prices in Q1 was in line …
29th April 2020
Bank has started to roll back liquidity provision and bond purchases as tensions ease Unemployment set to remain above levels consistent with full employment for years Interest rates will have to remain low for longer than markets anticipate The continued …
28th April 2020
Panic buying drives record retail sales Preliminary figures for March show that the economy held up better than we had anticipated last quarter. First, merchandise trade exports values rose by a stellar 23% m/m. Admittedly, the massive rise in exports …
24th April 2020
The RBNZ’s decision to lift LVR restrictions is unlikely to provide much support to house prices in New Zealand. We think that the sharp decline in home sales and confidence together with the likely drop in migration will result in prices falling by 12%. …
22nd April 2020
Overview - The restrictions imposed to limit the spread of the coronavirus will result in GDP falling at a double-digit rate in Australia and New Zealand in Q2. While activity will bounce back over the coming months, unemployment is set to surge and …
20th April 2020
Inflation to fall back below RBNZ’s target before long The rise in headline inflation from 1.9% in Q3 to 2.5% in Q4 will be of cold comfort to the RBNZ given the virus outbreak may cause inflation to slow below 1% before long. Quarterly inflation of 0.8% …
Labour market data has yet to show virus impact Australia’s labour market data showed that employment actually rose a touch in March. But the survey was conducted in the first half of the month, before the virus started to spread widely in Australia. It’s …
17th April 2020
Unemployment rate may reach 12% before long The coronavirus didn’t have a noticeable impact on the March labour market data but upcoming releases will show a sharp deterioration. The unemployment rate will probably be in double-digits before long. The …
16th April 2020
Australian banks have passed through the RBA’s recent cuts to some but not all of their lending rates and have tightened lending standards a bit. With banks now in better shape than during the global financial crisis, we think that lending standards won’t …
15th April 2020
Australian rating outlook lowered S&P has lowered the Australian credit rating outlook from ‘stable’ to ‘negative’ on the back of rising government debt. S&P has also noted it may officially lower Australia’s AAA within the next two years depending on the …
9th April 2020
The Reserve Bank of Australia (RBA) didn’t announce additional measures at today’s meeting and given the easing in tensions on financial markets we think it won’t adjust policy settings over the coming months. Looking further ahead though, the case for …
7th April 2020
Both exports and imports to dive further The small decline in the trade balance in February was the result of a sharp decline in exports being offset by a sharp decline in imports consistent with our view that domestic demand was set to struggle even …
New South Wales & Queensland are locked down We predicted last week that Australia will impose a similar lockdown as in New Zealand which would restrict activity to essential services. That hasn’t happened, largely because there’s been a drop in new …
3rd April 2020
Consumption will fall in Q1 and plunge in Q2 T he 0.5% rise in retail sales in February precedes the significant spread of the virus in Australia and we think consumption will fall sharply the coming months . The 0.5% m/m rise in retail sales values in …
Tensions in interbank and bond market easing Corporate bond spreads remain high but not high enough for RBA to buy private bonds With inflation set to fall short of its target for years to come, negative rates still an option The recent easing in …
2nd April 2020
New Zealand is now in a near-total lockdown for at least four weeks. And we wouldn’t be surprised if the lockdown lasted for two months. With no construction or non-food manufacturing taking place, activity will be hit hard. We have pencilled in a 30% q/q …
1st April 2020
House prices may decline before long We think the continued rebound in house prices will come to an end before long as the virus outbreak reduces the volume of home sales and weighs on household incomes. House prices across the eight capital cities rose …
The government assumes that around a quarter of all employees will benefit from the huge wage subsidy unveiled today. Indeed, we now expect the unemployment rate to peak at 12% instead of our previous estimate of 15%. But that still implies an …
30th March 2020
New Zealand in Lockdown, Australia on the brink This week New Zealand entered a near-total lockdown in an effort to contain the spread of the coronavirus. The restrictions are more draconian than in most other countries that have imposed lockdowns. …
27th March 2020
We estimate that a lockdown that would limit activity to “essential services” could knock off as much as 30-40% from Australia’s GDP for as long as it lasts. A lockdown is imminent and our best guess is that it will last for around two months. The upshot …
The ban on home auctions and open house viewings will probably result in lower home sales and there’s a growing risk that the government will ban the buying and selling of real estate altogether. Even once restrictions to prevent the spread of coronavirus …
25th March 2020
New Zealand is set to enter a near-total lockdown this week which will cause economic activity to all but stop. The RBNZ launched quantitative easing today, but we think that more monetary stimulus will be needed. We expect the Bank to cut the OCR into …
23rd March 2020
Australia is moving closer to shutting down a large share of its services sector and we now expect GDP to fall by 4% this year. The government is responding with a second, larger fiscal stimulus package that should prevent the recession from turning into …
Economic outlook grim As measures in place to contain the virus have grown more severe, the economic outlook in Australia has naturally become even bleaker. This week Scott Morrison announced that Australia’s borders are shut to all non-Australians. In …
20th March 2020
We suspect that the fiscal stimulus package that will be unveiled over the weekend will focus on limiting the damage from the coronavirus outbreak rather than on providing a large boost to demand. Measures will include wage subsidies for employers and …
