Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
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
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 …
