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You could argue that an escalation of global trade tariffs could actually benefit Australia and New Zealand in the near-term if it caused their currencies to weaken and led China to stimulate its own economy. But in the long-term, Australia and New …
16th March 2018
The Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at Grant Spencer’s final meeting as Governor on Thursday 22nd March and it’s likely to reiterate that policy will remain accommodative for a considerable …
15th March 2018
The economy failed to regain any momentum at the end 2017 with the production measure of GDP rising by a fairly subdued 0.6% q/q in the fourth quarter, as it did in the third. Looking ahead, we expect annual growth will average around 3.0% again this …
14th March 2018
While the modest rise in the Westpac measure of consumer confidence in March was a welcome sight following January’s weaker than expected retail sales figures, we remain cautious about the outlook for consumer spending. … Australia Consumer Confidence …
The economy will probably cope reasonably well even though both the mining and housing booms are over, but over the next couple of years it is unlikely to strengthen as much as policymakers hope. Over the next decade, life after mining may prove to be …
12th March 2018
The slump in the annual rate of productivity growth to a 22-year low of -1.0% in the fourth quarter suggests that Australian’s aren’t working very hard and that this will damage their prosperity in the long-run. But while we believe that economic growth …
9th March 2018
The rebound in the trade balance from a deficit of $1.14bn in December to a surplus of $1.06bn in January is welcome news, though it may be too early to conclude that net exports will substantially boost overall GDP growth in the first quarter. … …
8th March 2018
The most encouraging aspect of the fourth-quarter GDP release was the acceleration in the various measures of income growth. Even so, we suspect that still-subdued income growth and a soft housing market will mean that GDP grows by about 2.5% this year …
7th March 2018
The Reserve Bank of Australia left interest rates on hold at 1.5% for the 17 th consecutive meeting and it noted once again that progress in returning inflation to target is likely to be “gradual”, suggesting that a near-term rate hike remains unlikely. …
6th March 2018
Today’s data releases suggest that GDP growth was a touch stronger than we had expected in the fourth quarter of last year. That said, the smaller than anticipated rise in retail sales in January indicates that the probable rebound in real consumption …
Our relative views on monetary policy in the US and Australia suggest that US 10-year bond yields will rise further above Australian yields this year. While this would be rare, what’s more unusual is that the complete erosion of Australia’s traditional …
2nd March 2018
The private capital expenditure survey for the fourth quarter was a bit weaker than widely expected, but the key point is that investment is no longer the Achilles heel of the economy as firms are starting to flex their spending muscles. … Australia …
1st March 2018
While rising profits and confidence are boosting sentiment amongst Australian businesses, the uncertainty surrounding the policies of the new government has continued to weigh on business confidence in New Zealand. This divergence in business confidence …
28th February 2018
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at its policy meeting on Tuesday 6 th March and it will probably continue to signal that there is no risk of a near-term rate hike. Indeed, as progress in raising …
27th February 2018
Although our New Zealand Activity Proxy declined in December, the decent rise over the fourth quarter as a whole suggests that GDP growth accelerated at the end of last year. … New Zealand Activity Proxy …
26th February 2018
There has been a renewed focus in recent weeks on interest-only loans in Australia and the potential risk that these loans present to financial stability, particularly given a large portion of interest-only loans are due to expire in the next few years …
23rd February 2018
The unemployment rate may need to fall from 5.5% currently to around 4.0% before wage growth rises significantly. This is partly due to the existing excess capacity not captured by the unemployment rate, but also as the natural rate of unemployment may be …
21st February 2018
The rise in wage growth in the fourth quarter may be the first real sign that wages are benefiting from the recent strength of jobs growth. But real wages have been stagnant for two years. And the excess supply of labour and long-term structural forces …
Recent suggestions by the Australian Treasurer that APRA could ease its current restrictions on mortgage lending seem to be motivated more by politics than financial stability. With the RBA and APRA appearing to pour cold water on the idea, it’s hard to …
15th February 2018
The labour market started 2018 just as it ended 2017, with employment continuing to climb at a healthy clip. But the fall in hours worked to a record low will offset some of the boost to household incomes. And the unemployment rate needs to fall much …
If global equity markets are fearing higher interest rates, as this week’s fall suggest, then Australia and New Zealand offer something of an oasis as both the RBA and RBNZ dropped some heavy hints last week that they are in no rush to raise interest …
9th February 2018
The Reserve Bank of Australia used today’s Statement of Monetary Policy to hint for the third time this week that interest rates are unlikely to rise this year. We’ve been saying exactly that since early last year and the financial markets and other …
It was no surprise that the Reserve Bank of New Zealand left interest rate at 1.75% today and again projected that rates won’t rise until the second half of next year at the earliest. More interesting was that the Bank hinted how it is going to deal with …
7th February 2018
The decent rise in employment in the fourth quarter and the fall in the unemployment rate to a decade low may go some way to calming the current fears in the financial markets. And the absence of higher wage growth emphasises that the RBNZ won’t hike …
6th February 2018
The jitters in the financial markets are due to concerns that global interest rates will rise rapidly, but the Reserve Bank of Australia (RBA) did its part to calm fears by leaving interest rates at the record low of 1.5% today and by providing a new hint …
The fall in retail sales and the deterioration in the international trade balance in December probably won’t ease the current jitters in the financial markets, but the figures aren’t as bad as they look. In fact, the outlook for consumption is arguably …
Whichever way you look at it, there is very little evidence that the health of the economy is starting to boost inflation in Australia. Out of our six key charts that take a deep dive into the latest inflation figures, four imply that inflation will …
2nd February 2018
The Reserve Bank of New Zealand (RBNZ) will almost certainly leave the official cash rate on hold at 1.75% at its policy meeting on Thursday 8th February and, in the accompanying Monetary Policy Statement (MPS), we doubt that the Bank’s interest rate …
1st February 2018
Despite the strengthening of the activity data, the Reserve Bank of Australia won’t raise interest rates from 1.5% at the meeting on Tuesday 6th February and probably won’t hint in the following Friday’s Statement on Monetary Policy that rate hikes are …
31st January 2018
It is possible that price pressures are a little stronger than the CPI data for the fourth quarter suggest. But the main message is that inflation is still hovering just below the 2-3% target and it will probably stay there for another year or two. So …
2018 will be the first year this century that the Australian economy won’t benefit from either a mining or housing boom. In those circumstances, we doubt that GDP growth will rise above 2.5%. And despite a decent fiscal boost in New Zealand, a still-weak …
28th January 2018
The resurrection of the Trans-Pacific Partnership signals that Australia is open for business, but it won’t significantly boost economic growth. A weakening in the Australian dollar from the dazzling high of US$0.81 would provide a bigger boost in the …
25th January 2018
For all the talk about how the incoming Governor will deal with employment being added to the RBNZ’s mandate, the latest data suggest he may spend most of his time wondering why inflation is so low. … New Zealand Consumer Prices …
24th January 2018
The flow of economic data released in Australia and New Zealand in recent weeks has been encouraging and suggests that after slowing in the third quarter of 2017, both economies regained some momentum at the end of last year. In Australia retail sales …
The further rise in our New Zealand Activity Proxy in November suggests that the economy regained some momentum at the end of last year. That said, the plunge in business confidence in November presents a downside risk to our forecast for GDP growth in Q4 …
23rd January 2018
Economic figures released in recent weeks have been notably stronger than expected, suggesting that the Australian economy had plenty of momentum going into the start of this year. But we doubt this is a sign that 2018 will mark the year that GDP growth …
18th January 2018
The strong rise in employment in December rounded off an exceptional year for the labour market. Jobs growth is unlikely to be as strong this year, but the labour market will still make further progress. … Australia Labour Market …
The further rise in the Westpac measure of consumer confidence in January adds to the recent run of encouraging news about the health of the household sector and suggests that the risks to our forecast that consumption growth will remain around 2.0% this …
17th January 2018
While the upbeat nature of business employment surveys suggests jobs growth should be fairly decent this year, the exceptionally strong pace of job creation in 2017 seems unlikely to be repeated. … Will jobs growth continue to soar in …
14th January 2018
2018 may be the year that the Australian economy fails to grow at a much faster pace than the majority of its peers and its interest rate premium is wiped out. This may mean that 10-year bond yields in Australia end the year no higher than in the US and …
12th January 2018
The much stronger than expected surge in retail sales values in November, alongside the decent rise in October, suggests that real consumption growth bounced back in the fourth quarter. It also tallies with other encouraging signs about the health of the …
11th January 2018
2018 is widely expected to be the year that the Reserve Banks of Australia and New Zealand start to raise interest rates from their record lows. We disagree. In this Update, we outline five of our non-consensus calls for 2018 and highlight some potential …
9th January 2018
Financial stability concerns were in the spotlight in Australia for much of 2017 and although actions by the RBA and APRA have gone some way to addressing these concerns, recent news that household debt reached a new record high in the third quarter of …
5th January 2018
The further widening in the international trade deficit in November suggests that after making a neutral contribution to GDP growth in the third quarter, the external sector was probably a drag on GDP growth in the fourth quarter of 2017. … Australia …
Our money is on the Australian economy growing by 2.5% next year rather than 3.0%, which would mean growth is weaker than most expect and interest rates are likely to stay at 1.5%. If things are worse, you should probably blame housing. If they are …
21st December 2017
The good news is that the economy grew much faster in 2015 and 2016 than we all previously thought. The bad news is this makes the recent slowdown look a bit sharper and casts further doubt on the ability of the economy to generate inflation. … New …
20th December 2017
After slowing sharply in the third quarter, there have been some encouraging signs in recent weeks about the prospects for real consumption growth in Australia in the fourth quarter. In particular, retail sales bounced back to life in October following …
The only gift the Treasurer handed out in today’s Mid-Year Economic and Fiscal Outlook (MYEFO) was the one he gave himself, namely a stronger fiscal pot that will take a bit away from GDP growth next year. That said, he appears to be saving himself for …
18th December 2017
We expect the Treasurer will use his recent windfall of up to $10bn to emphasize in Monday’s Mid-Year Economic and Fiscal Outlook that he is on track to generate a budget surplus in 2020/21 and also to lay the foundations for personal income tax cuts …
15th December 2017
Another month of extraordinarily strong jobs growth in November leaves little doubt about the current health of the labour market. That said, there is still plenty of spare capacity which will probably keep a lid on wage growth for some time yet. … …
14th December 2017
