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Subdued economic growth and a softening labour market mean that today’s interest rate cut by the Reserve Bank of New Zealand will be repeated before the year is out. … New Zealand - RBNZ will cut again before the year is …
8th May 2019
The Reserve Bank of Australia made only the slightest downward revisions to its forecasts when it left interest rates unchanged at 1.50% today. But it noted that further improvements in the labour market will be needed for meeting its inflation target, …
7th May 2019
Subdued growth in real retail sales in Q1 means consumption growth may have eased from the end of 2018. Meanwhile falling import volumes probably meant that net trade made a solid contribution to GDP growth in Q1. Taken together, we estimate GDP growth …
China’s slower housing and infrastructure investment growth will weigh on demand for iron ore and metallurgical coal. Further increases in services exports are unlikely to offset that drag. The coming years will therefore be challenging ones for Australia …
6th May 2019
The pace of house price declines has eased in recent months and forward indicators suggest there may be a further slowdown ahead. However, we still expect houses prices to fall by 15% from their peak. And with mounting signs that the housing downturn is …
3rd May 2019
We expect the recent string of soft economic data will be enough for the Reserve Bank of New Zealand (RBNZ) to cut rates to 1.50% when it meets next week on Wednesday 8th May. Since the RBNZ shifted to an easing bias in March the economic data have …
2nd May 2019
The economic outlook has deteriorated in both Australia and New Zealand. In Australia, the downturn in the housing market and falling business confidence should mean that GDP growth will continue to soften. In New Zealand, we expect GDP growth to remain …
30th April 2019
Labor has pledged sizeable tax hikes that probably won’t be offset by higher expenditure, which means that fiscal policy will almost certainly be tighter under a Labor government than under the Coalition. However, a lot will depend on whether Labor can …
29th April 2019
We suspect that the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates to 1.25% on Tuesday 7th May. And given that we expect the labour market to start slackening …
The easing in underlying inflation this week prompted a sharp decline in market interest rate expectations. That makes sense because an equally weak inflation print prompted the RBA to cut interest rates three years ago despite continued improvements in …
26th April 2019
The softening in underlying inflation puts increasing pressure on the RBA to cut interest rates. We still expect the RBA to cut rates in August but the risks of an earlier cut have increased. … Consumer Prices …
24th April 2019
Our New Zealand Activity Proxy (NZAP) has picked up in early 2019, which suggests GDP growth may be bottoming out. That said, economic activity is likely to remain subdued over 2019 as business investment continues to falter and global growth eases. … New …
23rd April 2019
As the economic outlook has softened the RBA is inching closer to a rate cut. The analyst consensus has now come around to our view and foresees two 25bp cuts by early next year. But we think that the reduced potency of monetary policy combined with the …
18th April 2019
The solid employment gain in March doesn’t resolve the tension between weak activity and healthy labour market data. Our view is that the drag from the housing downturn will eventually win the upper hand and that the RBA will cut interest rates before …
The easing in headline inflation in Q1 increases the pressure on the Reserve Bank to cut rates at their next meeting in May. And with weak growth set to keep a lid on inflation, we think they will cut once more before the year is out. … New Zealand - …
17th April 2019
China announced this week that its anti-dumping investigation into Australian barley imports will drag on longer than planned, fuelling tensions between the two countries further. While China’s small reliance on coal imports means it could tighten earlier …
12th April 2019
A slowing global economy will magnify the headwinds from the housing downturn in Australia and slower net migration in New Zealand. We think that GDP growth will slow more sharply than most anticipate and expect central banks in both countries to lower …
9th April 2019
This week both the government and the opposition laid out their fiscal plans if they were to win the next election, with both sides promising significant income tax cuts. But given the negative gearing restrictions and removal of the franking credits …
5th April 2019
The strong 0.8% m/m rise in retail sales in February suggests that consumption growth may not have declined further in Q1, but we think the housing downturn will mean growth remains subdued in 2019. Meanwhile the fresh record trade surplus in February was …
3rd April 2019
The Coalition government’s Budget for 2019/20 promises additional tax cuts while still achieving a budget surplus. Labor will probably win next month’s federal election and we suspect it will at least match the proposed cuts. But that may not be enough to …
2nd April 2019
The Reserve Bank of Australia sounded more cautious when it left interest rates unchanged at 1.50% today. With the full impact of the housing downturn on economic activity yet to be felt, we think the Bank will start to cut interest rates soon, perhaps as …
We Expect house prices in the eight capital cities to fall by at least another 6%, though our sales-to-new-listings ratio points to smaller declines in coming months. … CoreLogic House Prices …
1st April 2019
The rapid improvement in the budget deficit provides the Coalition government with some scope to announce additional tax cuts or higher spending while maintaining its forecast of budget surpluses over the coming year. Meanwhile, we think that 10-year bond …
29th March 2019
The Australian and New Zealand economies both appear to be running out of steam with growth slowing sharply in the second half of 2018. And we think the outlook is set to deteriorate further. Annual GDP growth in Australia may plunge as low as 1.5% in …
28th March 2019
We believe that GDP growth in Australia will fall well below potential this year as the housing downturn bites. That means that unemployment will soon start to rise again and underlying inflation will remain well below the lower end of the Reserve Bank of …
27th March 2019
The RBNZ took a surprising dovish turn when it left the official cash rate on hold at 1.75% today, indicating that the next move is likely down. Given that we are more downbeat about the outlook for GDP growth than the Ban, we think the Bank is likely to …
The Reserve Bank of Australia (RBA) will welcome the continued tightening of the labour market when it leaves rates unchanged at 1.50% at its policy meeting on Tuesday 2nd April. But we’ve become even more concerned about the outlook for economic activity …
26th March 2019
We now believe GDP growth will slow to 1.5% in 2019, which would be well below the analyst consensus of around 2.5%. And we suspect that the recent uptick in the unemployment rate in New South Wales and Victoria will be followed by rising unemployment …
22nd March 2019
The Reserve Bank of New Zealand (RBNZ) will retain its neutral stance when it keeps rates on hold at its meeting on Wednesday the 27th March 2019. The softening in GDP growth in the second half of 2019 will have come as a disappointment to the Bank. But …
21st March 2019
The fall in the unemployment rate to an eight-year low in February will give the Reserve Bank of Australia renewed confidence in its forecast that the labour market will continue to tighten. By contrast, our more pessimistic outlook for GDP growth …
We think that the slowdown in annual growth in the fourth quarter will set the tone for growth to remain subdued throughout 2019. But as long as the labour market remains tight and underlying inflation continues to firm up the RBNZ shouldn’t be too …
20th March 2019
We believe that the downturn in the housing market will have a larger negative impact on the economy than most believe and have lowered our GDP forecast for 2019 to 1.5%. The upshot is that the labour market should start to slacken soon, forcing the RBA …
The continued decline in business confidence in February suggests that the falls in business investment will persist into 2019. And the deterioration in consumer confidence may motivate households to increase their savings, which will weigh on consumption …
15th March 2019
Irrespective of the incoming government’s planned policy, the deterioration in the economic outlook means that fiscal policy should become stimulatory to avoid exacerbating the downturn. … New government can’t ignore the weaker …
14th March 2019
The RBA appears to be confident that the labour market will continue to support growth. But this week’s disappointing GDP data suggests that the economic outlook will remain subdued for some time. If we are right, conditions in the labour market may soon …
8th March 2019
The soft growth in retail sales in January means that weakness in consumption at the end of 2018 probably continued into 2019. Meanwhile, net trade may not support GDP as much as implied by the large trade surplus, as it was driven, at least in part, by …
7th March 2019
Subdued GDP growth in final quarter of 2018 sets the tone for softer growth this year. And given that the RBA has already adopted a neutral stance, we now suspect it may cut rates as soon as August. … GDP …
6th March 2019
The RBA remained fairly confident when it left rates on hold today at 1.50% but we expect that as the data deteriorate this year the Bank will take a more dovish view. And before the end of the year the RBA will have to cut rates to stimulate the economy. …
5th March 2019
Data on investment spending released this week sent conflicting messages. We put more weight on the dismal construction work done figures and have penciled in falling business investment in the fourth quarter. And we think investment is probably going to …
1st March 2019
House prices in the eight capital cities have now fallen 8.9% from their peak making the current downturn the largest in Australia’s modern history, and we expect prices to fall by at least another 6%. … CoreLogic House Prices …
While the private capital expenditure survey showed a rise in capital spending in Q4, we think that private investment spending actually fell. And given the recent deterioration in business confidence, we expect business investment to decline further in …
28th February 2019
While business confidence in New Zealand seems to be recovering from the slump after 2017’s election, it has weakened in Australia. (See Chart.) That deterioration can partly be explained by softer conditions elsewhere. But the largest drop in sentiment …
27th February 2019
The Reserve Bank of Australia (RBA) will almost certainly leave interest rates unchanged at 1.50% at its policy meeting on Tuesday 5th March. While the Bank should reiterate its view that inflationary pressures will continue to strengthen, our view is …
26th February 2019
Labour market conditions in Australia remain a bright spot for now. But we suspect that the housing downturn, weaker business confidence and a global slowdown will all weigh on employment growth and result in a rise in the unemployment rate in 2019. … The …
22nd February 2019
The rise in auction clearing rates in early February is probably just temporary. Housing remains overvalued and other leading indicators point to a continued decline in house prices. We therefore still think the housing downturn has further to run. … The …
21st February 2019
The strong rise in employment combined with a stable unemployment rate should give the RBA some confidence in its optimistic forecasts, but we think the labour market will worsen again soon. … Labour Market …
Broadly unchanged wage growth in the fourth quarter of 2018 suggests that the unemployment rate remains above the natural rate. We think the unemployment rate may actually rise this year meaning wage growth is unlikely to pick-up from here. … Wage Price …
20th February 2019
Weak business sentiment in Australia is likely to be another drag on private investment in 2019. And given the role the housing downturn is playing in sentiment, we expect things to get worse before they get better. In New Zealand, the RBNZ has followed …
15th February 2019
We think the explicit neutral stance adopted by the RBNZ in today’s policy meeting is appropriate as we suspect that the economy will not gain enough momentum to support interest rate hikes until 2021. … New Zealand - RBNZ gets more realistic by taking a …
13th February 2019
The relatively small bounce-back in business conditions in January suggests that the collapse in December was more than a blip. The recent deterioration in sentiment is likely to mean that business investment did not recover in Q4 of 2018 and may remain …
12th February 2019
