Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The weakening in the Australian dollar to a 19-month low will provide a small boost to CPI inflation, but it won’t solve Australia’s persistent problem of low wage growth. While lowering the RBA’s inflation target may appear like a simple solution, it …
17th August 2018
The surprise decline in employment July isn’t a big concern as other evidence suggests the economy has not stalled. But even if the labour market were to shift back into top gear in the coming months, the road to much higher wage growth is a very long …
16th August 2018
We suspect that the continued stagnation in real wages in the second quarter will contribute to an easing in consumption growth this year, while the absence of a meaningful rise in nominal wage growth places a big question mark over the RBA’s forecast …
15th August 2018
Even though both the Australian and New Zealand dollars have weakened by more than 10% this year and have pretty much hit our end-year forecasts, the risks still lie on the downside. The tide may turn next year, however, if US interest rates peak and the …
14th August 2018
The fall in house prices seen so far is small by the standards of the average Australian downturn. But a further tightening in credit criteria may contribute to it morphing into the deepest and longest on record. … Putting the housing downturn into …
13th August 2018
The chances that interest rates in Australia will rise a bit earlier than we expect have grown this week while it has become more likely that interest rates in New Zealand will be unchanged for longer than we expect. That divergence gives us more …
10th August 2018
The Reserve Bank of Australia’s new projections that the economy will be in an almost perfect state in 2020 suggest that the Bank is edging ever so slowly towards raising interest rates. Our view that GDP growth will be weaker than the RBA expects and …
While leaving interest rates at the record low of 1.75% at today’s policy meeting, the Reserve Bank of New Zealand strongly suggested that the first interest rate hike is further away than it previously thought. That supports the more dovish rate forecast …
9th August 2018
The Reserve Bank of Australia appeared a bit more upbeat on the outlook for the domestic economy while leaving interest rates at 1.5% for the 24 th month today, but it continued to hint that interest rates won’t rise for a while yet. We’re expecting the …
7th August 2018
Australia’s liquefied natural gas (LNG) producers are unlikely to benefit much from China’s proposal to impose a 25% tariff on LNG imports from the US simply because China doesn’t buy that much LNG from America. But, if implemented and maintained, the …
6th August 2018
With the housing market slowdown in danger of morphing into the deepest and longest in Australia’s modern history, we doubt that the recent resilience of household spending will last. The risk is that the RBA leaves interest rates on hold for longer than …
3rd August 2018
Households appear to be coping well with the hit to their real spending power from rising petrol prices and the hit to their net wealth from falling house prices. But with house prices starting to fall at a faster rate in July, we still suspect that …
While leaving interest rates at 1.75% at the policy meeting on Thursday 9 th August, the Reserve Bank of New Zealand will probably acknowledge the recent softening in activity by revising down the GDP growth forecasts published in the accompanying …
2nd August 2018
The recent fall in the Australian dollar may mean that over the next year the external sector will give the economy a bigger helping hand. But in the second quarter, it looks as though net exports didn’t add anything to growth. And a further escalation of …
The acceleration in the housing downturn in July should make the RBA and some other analysts sit up and take notice. What’s more, the worst is yet to come. Our relatively bearish forecast that prices will gradually fall by 12% from peak to trough is …
1st August 2018
Although the labour market remains fairly healthy and employment is still within the RBNZ’s measures of the “maximum sustainable level”, the rise in the unemployment rate in the second quarter coupled with the recent plunge in business confidence …
The combined message from the Reserve Bank of Australia’s policy announcement on Tuesday 7 th August and the publication of the Statement on Monetary Policy on Friday 10 th will probably be that even though this will be the 24th month that interest rates …
31st July 2018
Our New Zealand Activity Proxy suggests that the economy lost further momentum in June and that GDP may now be growing by just 2.0% a year. Most worrying are the signs that the slump in business confidence is filtering through into weaker business …
The end of Australia’s housing boom and New Zealand’s migration boom mean that economic growth in both countries will probably fall short of expectations over the next couple of years. Australia may struggle to grow by much more than 2.5% a year while GDP …
30th July 2018
The fall in underlying inflation in the second quarter in Australia revealed this week has made us more confident in our non-consensus call that underlying inflation will stay below the RBA’s 2-3% target range for another two-and-a-half years yet. In …
27th July 2018
The rise in headline inflation to back within the RBA’s 2-3% target range for only the first time in 15 months was only possible because of a leap in petrol prices. There is hardly any price pressure elsewhere and, with underlying inflation having fallen …
25th July 2018
The financial markets are probably right to assume that the release of June’s bumper labour market figures has increased the chances that the Reserve Bank of Australia will raise interest rates a bit earlier than otherwise. But there’s unlikely to be …
20th July 2018
The labour market is improving quicker than the RBA expected, but it is probably the case that the unemployment rate would have to fall below 5.0%, other measures of spare capacity would have to improve more and wages growth would have to show more signs …
19th July 2018
The small strengthening in underlying price pressures in the second quarter is unlikely to make the RBNZ any keener to raise interest rates when it is becoming clearer that economic growth is slowing. We doubt that rates will rise until mid-2020, which …
17th July 2018
Housing finance commitments have started to edge up again and suggest that house prices won’t fall much further for now. Households are taking the weaker housing market in their stride and APRA Chairman Byres thinks that any further tightening in credit …
13th July 2018
Our relatively bearish view that GDP growth will slow from 2.8% last year to 2.0% next year has always been based on the idea that the end of the migration and housing booms would weaken consumption and dwellings investment. The latest evidence suggests …
11th July 2018
While the aging of the population will continue to exert a sizeable downward influence on the participation rate in the coming years, this will probably be more than offset by further rises in the participation rates of female workers and older workers. A …
9th July 2018
As well as fretting about the rise in global trade barriers, policymakers in Australia are also becoming more worried about housing. And rightly so. After all, some of the most reliable leading indicators suggest that the soft landing in the housing …
6th July 2018
A large chunk of the boost to consumption from the income tax cuts and the rise in the minimum wage, both of which came into effect on 1st July, is being offset by the leap in petrol prices. Moreover, with income growth subdued and house prices falling, …
5th July 2018
It looks as though a rebound in consumption growth will broadly offset a weakening in the external sector in the second quarter to keep the Australian economy cruising along nicely in the second quarter. … Retail Sales & International Trade …
4th July 2018
Growing concerns about the global trade dispute and the deepening domestic housing downturn mean that the Reserve Bank of Australia will probably leave interest rates at 1.5%, as it did at today’s meeting for the 23rd month, until late next year. While a …
3rd July 2018
The Reserve Bank of Australia probably isn’t too concerned by the further small fall in house prices in June. But the clear risk is that rising mortgage rates and tighter credit conditions prompt prices to fall at a much faster pace over the next year or …
2nd July 2018
The recent rebound in short-term funding costs is not big enough to prompt all banks to raise their mortgages rates by more than a few basis points. But the risk that funding costs rise further is one more reason why the Reserve Bank of Australia is …
29th June 2018
The changes to the Reserve Bank of New Zealand’s (RBNZ) policy statement after it left interest rates at 1.75% today are more cosmetic than substantive. But the Bank has acknowledged the growing downside risks to both the global and domestic economies. …
27th June 2018
The Australian and New Zealand dollars have weakened to US$0.74 and US$0.68 respectively as rising trade tensions between the US and China have reduced the appetite for riskier currencies. Looking ahead, the Aussie and kiwi dollars may weaken further. Our …
An apparent wilting desire to raise interest rates means that the Reserve Bank of Australia will leave interest rates at 1.5% at the policy meeting on Tuesday 3rd July and probably won’t raise rates until late in 2019. If anything, the chances have …
26th June 2018
The lacklustre rise in our NZAP in April suggests that after slowing in the first quarter the economy failed to regain much momentum in the second. We expect growth will continue to slow from here. … New Zealand Activity Proxy …
25th June 2018
The combination of the escalation in global trade tensions and some dovish developments at home have dragged down the Australian dollar to a one-year low of US$0.74. We suspect it will weaken further to US$0.72 by the end of the year. And if the US-China …
22nd June 2018
The Reserve Bank of New Zealand will almost certainly leave interest rates on hold at 1.75% at its policy meeting on Thursday 28 th June and Governor Orr may well repeat that rates will stay at this level for “some time to come”. But with GDP growth …
21st June 2018
GDP growth is by no means falling off a cliff, but the end of the migration and housing booms have already caused a marked slowdown and they probably mean growth will ease to just 2.0% next year. Against that backdrop, the RBNZ is unlikely to raise …
The escalating trade spat between the US and China could potentially boost the Australian economy in the near-term. But any reduction in global trade would be bad news for Australia in the long-term. Just how bad would partly depend on how well …
20th June 2018
Governor Lowe outlined in a speech earlier this week that before interest rates are raised from their record low of 1.5% the RBA will want to have “reasonable confidence that inflation is picking up to be consistent with the medium-term target and that …
15th June 2018
While the unemployment rate edged down in May, the underutilisation rate held steady suggesting that there is still plenty of slack in the labour market. And in his speech yesterday, Governor Philip Lowe suggested the RBA is increasingly focusing on …
14th June 2018
The most likely consequence of the rapid build-up of household debt over the past decade is a number of years of softer GDP growth and lower interest rates than widely expected. But the risk of a more painful consequence, namely a recession or a financial …
13th June 2018
While the modest rise in the Westpac measure of consumer confidence in June is encouraging, we remain cautious about the outlook for consumption growth. … Australia Consumer Confidence …
In order to grow by 3.1% in the year to the first quarter, the Australian economy returned to the old habit of relying on resources. This won’t be possible in the second quarter nor in the coming years when Australia’s resources exports will peak. And …
8th June 2018
After having been a big factor behind the strong rise in GDP in the first quarter, April’s international trade data suggest that net exports won’t be as supportive in the second quarter. So just one day after the release of the 1.0% q/q rise in GDP, the …
7th June 2018
Australia stands out as one of the few advanced economies that strengthened at the start of the year. But with households struggling even before the Royal Commission has prompted tighter credit conditions, the first quarter might be as good as it gets. So …
6th June 2018
While leaving interest rates at the record low of 1.5% again today, the Reserve Bank of Australia hinted that it is not too worried about the economic implications of the Royal Commission investigation into the banks. We are more concerned and believe …
5th June 2018
After stalling in March, the stronger than anticipated rise in retail sales in April was welcome news. Nevertheless, with household budgets still under pressure, we continue to expect consumption growth to weaken this year. … Australia Retail Sales …
4th June 2018
