Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
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 …
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
19th March 2020
Unemployment rate will surge this year Today’s data show that the coronavirus did not have a significant impact on the Australian domestic economy in February. Even so, we think the draconian restrictions put in place will result in economic activity …
Growth was subdued even before the virus outbreak The decline in GDP growth in New Zealand in the fourth quarter shows that the economy was struggling even before the Covid-19 outbreak which will surely drag the New Zealand economy into recession in the …
18th March 2020
The draconian coronavirus containment measures adopted by Australia’s government mean that we now expect GDP to fall by 2% this year. The Australian government is likely to respond with a larger fiscal stimulus package than the one announced last week …
While the New Zealand government’s large stimulus package will soften the blow from the coronavirus outbreak, it will not prevent a recession. As such, we still expect the RBNZ to launch quantitative easing in the coming weeks. The government today …
17th March 2020
Australian firms were in good shape on the eve of the coronavirus outbreak, but the impending collapse in foreign tourism and weaker retail spending will lift loan write-offs in those sectors. The banks aren’t as well prepared to weather those loan losses …
New comprehensive restrictions on travel mean that both Australia and New Zealand are headed for recession. We expect the Reserve Bank of New Zealand to follow up today’s emergency 75bp rate cut with quantitative easing before long. And the Reserve Bank …
16th March 2020
Consumption will be weak despite oil price drop The price of Brent crude oil fell sharply from $45 per barrel at the end of last week to US$32 now. We expect prices to gradually recover to around US$48 per barrel by the end of the year. But the key point …
13th March 2020
The large fiscal stimulus package unveiled today may be able to prevent a recession. But we still expect the RBA to cut rates to 0.25% and launch quantitative easing over the next few months. The fiscal stimulus package presented by the federal government …
12th March 2020
We think that the coronavirus outbreak and the related disruptions in China and to tourism more broadly will push the New Zealand economy into recession. That’s why we expect the RBNZ to slash rates by 75bp to help offset the impact of the coronavirus …
11th March 2020
In a moderate scenario where demand returns to pre-coronavirus levels by year-end, we estimate that the outbreak of the disease will knock off 1% from GDP growth this year. In a more severe scenario where the disruptions last beyond the end of the year, …
10th March 2020
Most central banks that have introduced quantitative easing in recent years have done so by pledging to buy a certain amount of government bonds. Our base case is that the RBA will do the same when it launches QE over the coming months, but a yield target …
9th March 2020
Economic outlook grim GDP growth slowed a touch to 0.5% q/q in Q4. And with data from January showing signs of weakness even before the impact of the coronavirus, our forecast that GDP contracted by 0.1% in Q1 is now looking optimistic. The trade surplus …
6th March 2020
Worst is yet to come for retail sector Retail sales fell for the second consecutive month in January. And given that this happened before the coronavirus started to spread in Australia in earnest, the outlook for consumption remains weak. The 0.3% m/m …
We expect the Treasury to announce only a small fiscal package of around $2bn in response to the coronavirus outbreak. With economic activity slowing sharply and revenues undershooting expectations, that should be enough to thwart the government’s aim of …
5th March 2020
Worst is yet to come for trade The small decline in the trade surplus in January masks larger weakness in both export and import values. And we think the coronavirus outbreak means that exports have further to fall in the coming months . The trade surplus …
GDP growth will weaken further in 2020 GDP growth remained subdued at the end of last year, and given the fallout from the coronavirus outbreak we expect the economy to deteriorate further in 2020. The 0.5% quarterly rise in GDP was a touch faster …
4th March 2020
With the impact of the coronavirus on economic activity set to intensify, we expect the RBA to follow up today’s 25bp rate cut with another 25bp cut in April. It looks increasingly likely that the disease will weigh on the labour market, which raises the …
3rd March 2020
