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The RBA changed tact this week and shifted away from its long-held tightening bias to a neutral stance on interest rates. This move was accompanied by a new set of downgraded economic forecasts, which project that headline inflation will not return to …
8th February 2019
The Bank will be weighing up the impact of a tighter labour market but weaker GDP growth when it leaves interest rates at 1.75% on Wednesday. It’s unlikely that any of the recent data will cause the RBNZ to change their forecasts for interest rate hike in …
7th February 2019
The bounce in the unemployment rate in Q4 was expected and the RBNZ has previously stated that this level of slack in the labour market is consistent with employment around its maximum sustainable level, so we doubt they will be concerned. What’s more, …
6th February 2019
Although the RBA took a more dovish tone when it left rates on hold today we think it will need to consider cutting rates before long as the economic outlook deteriorates. While the RBA still sees growth in 2019 of around 3% we are much less optimistic …
5th February 2019
Household spending appears to easing and will probably continue to do so as the outlook deteriorates in 2019. Meanwhile, net trade may turn into a drag on GDP growth in the fourth quarter. … Retail Sales & International Trade …
The final report by the Royal Commission may add to the changes in bank behaviour that are already underway. However, the report did not recommend much that is likely to cause an upheaval for the finance industry. We therefore expect credit growth to …
4th February 2019
The RBA will probably continue to signal that the next move in rates is up at Tuesday’s meeting. But with mounting signs that the housing downturn is spreading to other parts of the economy and price pressures abating, we think the Bank will have to cut …
1st February 2019
House prices have now fallen 7.6% from their peak and the pace of declines in recent months leads us to believe prices may now fall 15% from peak to trough. We believe such a large downturn would drive an easing in GDP growth and means that the RBA may …
Slower growth in China won’t immediately restrain Australia’s exports. But by lowering commodity prices, it makes investment in new mining projects less profitable and means that the mining investment slump may have further to run. … What does slower …
31st January 2019
The RBA will probably reduce its GDP growth forecasts at next week’s meeting but should still signal that the next move in rates will be up. Our more pessimistic outlook for economic activity, the labour market and inflation suggest that the Bank may …
30th January 2019
Inflation remained below the lower end of the RBA’s target range in the fourth quarter and we think it won’t rise within the target band any time soon. And if GDP growth slows as sharply as we anticipate, that means the RBA may soon have to consider …
A renewed increase in public support for first-time home buyers would probably result in a rebound in home sales and house prices. But with federal elections due by May, any step-up in government handouts is unlikely to occur before the middle of the …
28th January 2019
The downturn in the housing market means that the recent stability of the unemployment rate probably won’t last. We expect jobs growth to slow to 1% next year and the unemployment rate to creep up to 5.5% which should keep a lid on wages growth. …
25th January 2019
The decent rise in employment in December shows that the housing downturn isn’t having a major impact on the labour market yet. But we expect domestic demand to slow sharply this year so jobs growth should continue to weaken and the unemployment rate may …
24th January 2019
Our New Zealand Activity Proxy (NZAP) suggests economic activity remains soft and that the slowing in GDP growth has further to run. That supports our view that GDP growth will weaken from 2.8% in 2018 to 2.2% in 2019. … New Zealand - Activity proxy still …
23rd January 2019
While inflation remained just below target in Q4, it will probably fall further over coming months as the full impact of the recent drop in the oil price has yet to be felt. However, the RBNZ won’t be too concerned as underlying inflation should continue …
22nd January 2019
We believe that the downturn in Australia’s housing market will become by far the deepest and longest on record. By curbing dwellings investment, consumption and bank lending, we think it will result in GDP growth slowing from close to 3% last year to 2% …
Australia’s housing downturn is deepening. Prices will probably fall by more than we had previously anticipated and the drag from falling dwellings investment will be larger. The experience from housing downturns in other advanced economies is that …
18th January 2019
We think that 2019 will be the year in which previous excesses in Australia’s housing market will catch up with the economy. We believe that the deepening housing downturn will become a far bigger drag on Australia’s GDP growth than most anticipate. …
17th January 2019
While the recent falls in oil prices may boost consumer spending, they render investment in new LNG projects less attractive and may therefore restrain mining investment. Meanwhile, the slump in building approvals will restrain dwellings investment. But …
11th January 2019
While the solid rise in retail sales values in November suggests that households are still coping well with falling house prices and sluggish incomes gains, we think that consumption growth will slow this year. … Retail Sales …
The recent declines in petrol prices may boost consumer spending by around 0.6 percentage points in the first half of 2019. But we suspect that this impact won’t be enough to prevent consumption growth from slowing from 2.6% in 2018 to 2.0% this year. … …
9th January 2019
The trade surplus will probably rebound in December but will expect net trade will make a negative contribution to Q4 GDP growth. … International Trade …
8th January 2019
We correctly predicted that the Australian dollar would fall to US$0.70 by the end of last year and we think it will depreciate further this year as the prices of key commodity exports fall and risk aversion prevails. The weaker exchange rate should …
4th January 2019
GDP growth will probably weaken in both Australia and New Zealand in 2019. And even though the labour market may tighten a little further, inflation is unlikely to rise much. The upshot is that monetary policy will have to remain loose for longer than …
3rd January 2019
House prices fell the most in December since the current downturn started and a further deterioration in the balance between supply and demand suggests that prices in Melbourne and Sydney will keep falling for a while yet. … CoreLogic House Prices …
2nd January 2019
We doubt that the phasing-out of caps on interest-only loans will provide much support to the housing market as there’s still a large imbalance between supply and demand. And the government won’t provide much support either as it has pledged to tighten …
21st December 2018
The latest NAB survey showed that firms are facing the largest difficulties getting finance since 2012, which suggests that credit growth may slow sharply. (See Chart 1.) That may be a reflection of higher funding costs for banks as well as the threat of …
20th December 2018
The solid rise in employment in November will give the Reserve Bank of Australia renewed confidence inits optimistic forecasts following the disappointing Q3 GDP data. But labour market slack is diminishingonly slowly and even by 2020 wage growth may not …
While GDP growth softened in the third quarter early signs suggest growth may be a little firmer in Q4 so we doubt the Reserve Bank of New Zealand will be too concerned. But we expect GDP growth to weaken further next year which suggests that the RBNZ …
19th December 2018
The Coalition Government indicated in today’s Mid-Year Economic and Fiscal Outlook that it will present some sweeteners ahead of the upcoming election. Even so, fiscal policy will become more restrictive. And the key point is that Labor will probably win …
17th December 2018
The rapid improvement in the budget deficit will allow the government to use the upcoming Mid-Year Economic and Fiscal Outlook to deliver some early Christmas presents. But the Treasurer will probably reiterate its pledge of achieving a budget surplus in …
14th December 2018
We estimate that house prices in Sydney will eventually decline by 20% from their peak and by 17% in Melbourne. This would make the downturn in each city the largest in modern history. The slowdown in the housing market is a key reason why we expect GDP …
12th December 2018
While the flattening of the US yield curve suggests that the US economy is likely to slow soon, it doesn’t tell us much about developments in Australia. And while we expect Australia’s yield curve to steepen a little, low short-term interest rates mean …
10th December 2018
The financial markets are now pricing in a small chance of a rate cut by the RBA next year following the release of weak GDP data this week. But while we expect GDP growth to slow further next year, we think that the improvement in the labour market since …
7th December 2018
Household spending isn’t falling off a cliff just yet but we still think that the downturn in the housing market will restrain consumption growth before long. Meanwhile, net trade may turn into a drag on GDP growth in the fourth quarter. … Retail Sales & …
6th December 2018
It would be tempting to blame the slowdown in GDP growth in the third quarter on temporary factors. But we believe that the full effects of falling house prices and tighter credit conditions haven’t been felt yet and we expect GDP growth to slow further …
5th December 2018
The Reserve Bank of Australia (RBA) sounded a little more cautious when it left interest rates unchanged at 1.50% for the 28th month. That supports our view that rates will not rise until late in 2020. … Cautious RBA may only hike rates in …
4th December 2018
We suspect the decline in house prices in the eight capital cities is going to continue and house prices will go on to eventually fall by at least 12%. … CoreLogic House Prices …
3rd December 2018
The rapid decline in the budget deficit suggests that the Government may announce higher spending or tax cuts in next year’s Budget. And Labor has pledged to eliminate a number of tax privileges if it wins the next federal election. The upshot is that the …
30th November 2018
The recent slump in crude oil prices means that the tailwind to consumer price inflation from soaring energy prices won’t be sustained. After boosting Australia’s headline inflation by 0.6 percentage points in the third quarter, automotive fuels may …
29th November 2018
The fall in private capital expenditure wasn’t as bad as the headline suggests but a slowdown in GDP growth in the third quarter will be hard to avoid. … Private Capex Survey …
The Reserve Bank of New Zealand’s decision to ease mortgage lending restrictions probably won’t result in a major pick-up in lending and home sales. And with house prices looking stretched relative to incomes and net migration slowing, we think that house …
28th November 2018
The Reserve Bank of Australia (RBA) will hold rates steady at next week’s meeting and signal that the first hike is still some way off. With the downturn in the housing market continuing unabated and the recent slump in crude oil prices likely to push …
27th November 2018
Immigration has been very strong in New Zealand in recent years but we think it will slow sharply over the next couple of years. By contrast, we don’t think that the Australian government will significantly restrain net migration despite PM Morrison’s …
23rd November 2018
Australia’s economy has become less sensitive to conditions in the US as their trade links have diminished. The upshot is that the RBA should be able to hike interest rates in 2020 even if our forecasts prove accurate and the Fed is simultaneously cutting …
21st November 2018
Policy changes and a narrowing between the relative attractiveness of Australia and New Zealand will contribute to a slowdown in net migration to New Zealand. Easing net migration will cause growth in consumption and dwellings investment to decline and is …
19th November 2018
The Australian Labor Party’s fiscal proposals may not be quite as restrictive as we had thought. But we still believe that fiscal policy would be tighter if Labor wins the next Federal election. Meanwhile, the latest batch of encouraging labour market …
16th November 2018
The unemployment rate remained at a six-year low in October and will probably fall a little further over coming months. However, we still think that wage growth will only pick up slowly and the RBA won’t be in a rush to raise interest rates. … Labour …
15th November 2018
The increase in annual wage growth from 2.1% in Q2 to 2.3% in Q3 is nothing to get excited about as it was partly driven by an increase in the minimum wage. What’s more, subdued growth in real wages means that households may soon start to respond to …
14th November 2018
