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We estimate that Labor’s plans to tighten fiscal policy would dampen consumer spending by around 0.3 percentage points in both 2019 and 2020, shaving 0.2 percentage points off GDP in each of those years. Meanwhile, its proposals for a number of regulatory …
13th November 2018
Both the Reserve Bank of Australia and the Reserve Bank of New Zealand displayed a little more confidence in their optimistic forecasts when they left interest rates unchanged this week. We think that in both economies, GDP growth will fall well short of …
9th November 2018
The Reserve Bank of New Zealand (RBNZ) lifted its inflation forecasts a little bit when it decided to leave interest rates unchanged at 1.75% today. But it still signalled that rates won’t rise until late in 2020. We are more pessimistic about the outlook …
7th November 2018
The recent slump in building approvals suggests that the supply overhang in the housing market may disappear next year. But we still think that the current downturn will prove to be the longest and deepest in Australia’s modern history. … House prices …
The dramatic fall in the unemployment rate to 3.9% in the third quarter should encourage the Reserve Bank and suggests that they may raise rates earlier than we had anticipated. However, we still think a slowdown in GDP growth next year will mean that …
The upward revision to the RBA’s growth and inflation forecasts suggest that the Bank is moving closer to tightening policy. But we still think that the downturn in the housing market will result in slower growth before long and retain our forecast that …
6th November 2018
The slowdown in underlying inflation in the third quarter didn’t come as a shock to the RBA. But the bigger picture is that market forces are still keeping inflation subdued. And with early signs that households are responding to the slump in the housing …
2nd November 2018
The subdued rise in real retail sales in the third quarter means that consumer spending growth probably slowed. While falling petrol prices should provide some relief to households soon, we think that the downturn in the housing market will result in …
The Reserve Bank of New Zealand will keep interest rates unchanged at 1.75% at the policy meeting on Thursday 8th November, with recent encouraging economic data making a cut less likely. Even so, we think that future economic activity will fall short of …
1st November 2018
The Reserve Bank of Australia (RBA) will welcome the continued tightening of the labour market when it holds interest rates steady at 1.50% on Melbourne Cup Day, which falls on Tuesday 6th November. But with the housing downturn accelerating and inflation …
Continued solid growth in export volumes suggests that the trade war isn’t yet acting as a major drag for Australia’s export sector. In fact, we think that the weaker exchange rate will result in a boost to GDP growth from net trade over the coming year. …
The continued fall in house prices in October is consistent with our view that prices will ultimately drop by at least 12%, making the current downturn the longest and deepest in Australia’s modern history. … CoreLogic House Prices …
The drop in inflation in the third quarter back below the 2-3% target rate won’t frighten the RBA too much, but it does look more like a scary Halloween trick than a treat. We believe the RBA will miss its inflation target for another two years. So even …
31st October 2018
Households responded to rising house prices by lifting spending and we think they will eventually respond to falling prices with lower spending. This wealth effect may lower annual GDP growth by 0.3 percentage points per year. … House prices falls will …
29th October 2018
Falling equity and house prices have both made the news this week. But when it comes to what is going to influence the Australian economy, housing matters much more. The weakening housing market is one reason why we are more cautious than most on the …
26th October 2018
Even though the unemployment rate has fallen to the Reserve Bank of Australia’s 5.0% estimate of the natural rate, the RBA will still want to see signs of much faster wage growth before it hikes interest rates. Our view that wage growth may not rise to …
19th October 2018
Whether or not the decline in the unemployment rate in September to the RBA’s estimate of the natural rate of 5.0% prompts the Bank to raise interest rates sooner depends on what happens to wage growth. Our view is that 5.0% is not the magic number and …
18th October 2018
The jump in inflation from 1.5% in Q2 to 1.9% in Q3 was largely driven by higher energy prices and won’t allow the RBNZ to conclude that underlying price pressures are strengthening. While Q3’s data suggest that a rate cut looks even less likely than …
16th October 2018
Even though Australia is strongly dependent on the health of China’s economy, it won’t suffer much from China’s escalating trade conflict with the US. If anything, in the near-term it will benefit from the recent weakening of the Australian dollar and …
15th October 2018
The recent plunge in equity prices, surge in petrol prices and rise in borrowing costs all triggered by developments overseas won’t hurt the Australian economy much. But they do add to other headwinds that will probably result in domestic demand softening …
12th October 2018
Our forecasts suggest that by the time the Reserve Banks of Australia and New Zealand get round to raising interest rates from record lows, the US Fed will already be cutting them. We think that a renewed easing in GDP growth in Australia, from 3.2% this …
10th October 2018
We doubt that the gap between the Reserve Bank of Australia’s relatively upbeat tone and the downbeat feel of the recent economic news will be sustained for long. We suspect the RBA may become a little more concerned about how credit conditions and the …
5th October 2018
The rebound in retail sales in August provides further evidence that households are still proving reasonably resilient to low income growth and falling house prices. But with house prices falling at an accelerating pace in September and petrol prices …
The small rise in the international trade surplus in August provides more evidence that the US-China trade war is not affecting Australia’s external sector. In fact, the recent weakening in the Australian dollar will probably mean that the external sector …
4th October 2018
The Reserve Bank of Australia (RBA) sounded a bit more confident in its economic outlook when it decided to leave interest rates unchanged at 1.5% for the 26th month today. But we still think that GDP growth will fall short of the Bank’s optimistic …
2nd October 2018
The largest monthly fall in house prices since the global financial crisis underlines that the current downturn may well prove to be the longest and deepest in Australia’s modern history. … CoreLogic House Prices …
1st October 2018
The shrinking budget deficit gives the Coalition government a bit more fiscal ammunition to deploy ahead of Australia’s next Federal election, while there is no way of knowing at this stage how the Royal Commission will influence the opinion polls. What …
28th September 2018
The Reserve Bank of New Zealand kept the faith in its relatively optimistic forecasts for the economy while leaving interest rates at 1.75% for the 22 nd month today, but you could argue that the policy statement sounded a bit more dovish. Our view that …
27th September 2018
The surprising strength of economic growth in the second quarter has led us to revise up our forecasts for GDP growth in the 2018 calendar year from 2.5% to 3.2% for Australia and from 2.5% to 2.7% for New Zealand. But an easing in investment growth and …
26th September 2018
Although the Reserve Bank of Australia will note the strength of the recent news on the domestic economy while leaving interest rates at 1.50% at the meeting on Tuesday 2nd October, it’s unlikely to show signs that the data have made it keener to raise …
25th September 2018
After revamping all our forecasts, we have concluded that the RBA and the RBNZ probably won’t raise interest rates until late in 2020 and late in 2021 respectively. That explains why we now expect the Australian dollar to weaken to US$0.65 next year and …
21st September 2018
The Reserve Bank of New Zealand will keep interest rates unchanged at 1.75% at the policy meeting on Thursday 27th September and will probably acknowledge that GDP growth in Q2 was stronger than it had anticipated. But we still think that economic …
20th September 2018
The solid rise in GDP in the second quarter will give the RBNZ more confidence in its view that GDP growth will rise back above 3.0% next year. In contrast, we believe that low confidence, a soft housing market and easing net migration will result in …
Our new forecast that the Reserve Bank of Australia won’t raise interest rates from the record low of 1.5% until late in 2020 compares to the consensus view that lift-off will take place late next year. That partly explains why we now expect the …
17th September 2018
This week the Australian economy took one more step towards meeting the conditions that would require higher interest rates, but it may be another 12-18 months at the least before the RBA has enough confidence in the outlook for wages growth to pull the …
14th September 2018
The labour market is edging closer to the conditions that are necessary to trigger faster wage growth, but it may be another couple of years yet before it gets there. … Labour Market …
13th September 2018
The bulk of the recent leap in GDP growth has been driven by the behaviour of businesses, but firms probably won’t be able to support growth for long. An easing in private investment growth is one reason why we think GDP growth will slow from about 3.2% …
10th September 2018
The recent stellar performance of the Australian economy hasn’t made it much more likely that the RBA will raise interest rates sooner because it is businesses that are benefiting most not households. Even if the economy were to continue to grow at the …
7th September 2018
It looks as though the contribution to real GDP growth in the third quarter from net exports will be similar to the 0.1 percentage point added in the second quarter. But the near-stagnation in imports in July provides some tentative evidence that domestic …
6th September 2018
The surge in GDP growth in the first half of the year meant that the Australian economy notched up 27 years without a recession in style. But with house prices falling, credit conditions tightening and the support from the global economy fading, the …
5th September 2018
The upbeat tone of the comments by the Reserve Bank of Australia after it left interest rates at the record low of 1.5% for the 25th month today is starting to grate more obviously with the incoming economic news. Our view that the economy won’t live up …
4th September 2018
It's become more likely that GDP growth in the second quarter was a bit stronger than we have been expecting, but the stagnation in retail sales values in July suggests that consumption may have lost some momentum at the start of the third quarter. … …
3rd September 2018
With the full effects of tighter credit conditions and rising mortgage rates yet to be felt, the current housing downturn will probably end up being the longest and deepest in Australia’s modern history. … CoreLogic House Prices …
Australia is still a very long way from a recession or a financial crisis, but this week’s news that Westpac is hiking its mortgage rates has raised the risk a bit. After all, higher mortgage rates, falling house prices and tighter credit conditions are …
31st August 2018
Just 18 months after it got going, the recovery in private investment appears to be running out of steam. This partly explains why we estimate that GDP in the second quarter may have risen by just 0.5% q/q. … Private Capex Survey (Q2) & Building Approvals …
30th August 2018
Australian households have been more resilient to low income growth and falling house prices than we expected. After rising by just 0.3% q/q in the first quarter, the solid rises in retail sales in recent months imply that real consumption rose by about …
29th August 2018
Although the Reserve Bank of Australia will once again leave interest rates at 1.5% at the policy meeting on Tuesday 4th September, we sense that Governor Lowe has started to send some subtle signals that the Bank is warming to the idea of raising rates. …
28th August 2018
This week’s political chaos has increased the downside risks to the Australian dollar. Although the markets welcomed the news that Scott Morrison has replaced Malcolm Turnbull as Australia’s Prime Minister, the bigger question is who will be in the top …
24th August 2018
As politicians don’t influence the economy by as much as they’d like to believe, the growing uncertainty over the Prime Minister’s position is unlikely to significantly dent activity. That said, recent events could crimp GDP growth further ahead if a new …
22nd August 2018
The recent drought is hurting many farmers, their communities and the agricultural sector. But it is unlikely to put a big dent in the output of the whole economy or significantly raise CPI inflation. … Drought won’t dent the economy …
20th August 2018
