Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
We believe that the financial markets are wrong to price in the possibility that the Reserve Bank of Australia (RBA) will raise interest rates twice next year. Admittedly, it is possible that after leaving rates at the current record low of 1.5% at the …
26th September 2017
The financial markets won’t worry too much about how long it takes the various parties to form a government after the weekend’s general election, but the negotiations could influence the outlook for the economy and the New Zealand dollar over the next …
25th September 2017
Philip Lowe has notched up an impressive scorecard in his first year as Governor of the Reserve Bank of Australia, but greater challenges lie ahead. There are reasons to believe that economic growth and inflation won’t live up to Lowe’s lofty …
22nd September 2017
While Grant Spencer will almost certainly decide to keep interest rates on hold at 1.75% at his first meeting as Governor of the Reserve Bank of New Zealand (RBNZ) on Thursday 28 th September, the upcoming general election creates some uncertainty around …
21st September 2017
The 0.8% q/q rise in the production measure of GDP in the second quarter won’t prevent the RBNZ from leaving interest rates at 1.75% at next Thursday’s policy meeting and striking a dovish tone too, but it may give the National Party a bit of a boost …
Once you take into account the structural decline in interest rates over the past 40 years, housing in Australia isn’t as overvalued as some analysts have suggested. In fact, in most capital cities it is hardly overvalued at all. It even appears fairly …
20th September 2017
The outcome of the general election on Saturday may well alter the paths that New Zealand’s economy and the kiwi dollar tread over the next few years. But we doubt that any initial reaction would be large and the dollar would probably hold up well even if …
Even though house price inflation on the ABS measure held steady at 10.2% in the second quarter, there are some signs beneath the surface that prices have started to lose momentum. Other forward-looking indicators support that view and suggest that by …
19th September 2017
While the acceleration in full-time jobs growth in Australia since the start of the year is clearly a positive development for income and consumption growth, the impact on wage growth and inflation is unlikely to be as good. That’s because it hasn’t eaten …
15th September 2017
The recent rise of the Australian dollar to US$0.80 and developments overseas have led us to revise up our end-year forecast from US$0.70 to US$0.75. But we still believe that a fall in iron ore prices and an erosion of Australia’s interest rate premium …
The age-old volatility of Australia’s jobs data has given way to a remarkable period of consistency, with the 54,200 leap in August marking the eleventh rise in as many months. That’s the longest run of consecutive gains in six years. But rapid jobs …
14th September 2017
The Westpac measure of consumer confidence edged up in September, but it remains low by historical standards and is consistent with a slowdown in the annual rate of consumption growth from 2.6% currently to closer to 2.0%. … Australia Consumer Confidence …
13th September 2017
While GDP growth should hold up fairly well over the next year, we expect there will be a sharper slowdown than the RBNZ and most analysts are anticipating in 2019 as the impacts of a cooling housing market and slower net migration take full effect. As a …
12th September 2017
The slump in real income growth has forced Australian households to reduce their saving rate to a nine-year low in order to continue increasing their spending. This can’t continue indefinitely, especially when debt is still rising, confidence is falling …
8th September 2017
The stagnation in retail sales and the fall in the international trade surplus in July suggest that GDP growth in the third quarter will be weaker than the second-quarter’s 0.8%. With households’ incomes hardly rising at all, there is a real danger that …
7th September 2017
The 0.8% q/q rise in GDP in the second quarter overstates the health of the economy as it needs to be taken in context of the weak first quarter. The underlying rate of growth is probably more like 0.5-0.6% q/q, or 2.2% a year. What’s more, there is …
6th September 2017
The Reserve Bank of Australia has now left interest rates at 1.5% for 13 months and we suspect the combination of subdued GDP growth, low inflation and a growing focus on financial stability will mean it keeps rates there for another two years yet. Our …
5th September 2017
One recent data release showed that mining investment in Australia is still plunging while another suggested it has started to rebound. Both are technically right, as it all depends on how you measure investment. The broader point, though, is that mining …
1st September 2017
The private capital expenditure survey for the second quarter suggests that the recent rises in business confidence may soon translate into a bit more investment. A decent rise in business investment is one of the reasons why we estimate that the muted …
31st August 2017
While we agree with the assessment of the financial markets that there is next to no chance of an interest rate hike when the Reserve Bank of Australia (RBA) meets on Tuesday 5 th September, we believe that the markets have got ahead of themselves by …
29th August 2017
The general election in New Zealand could have a bigger influence on the economy than seemed possible a few weeks ago. If National needs the support of NZ First to form a majority government then the economy would probably be a little weaker than …
25th August 2017
It looks as though both Australia and New Zealand shook off the weakness at the start of the year as GDP growth may have bounced back in the second quarter. We estimate that the disappointing 0.3% q/q and 0.5% q/q respective rises in GDP in the first …
23rd August 2017
The notable rise in our New Zealand Activity Proxy (NZAP) over the second quarter as a whole indicates that GDP growth may have accelerated from a disappointingly weak 0.5% q/q in the first quarter to around 1.2% q/q in the second quarter. … New Zealand …
21st August 2017
If a cyclical rise in wage growth in Australia was underway, it would show up first in the strongest states and sectors. But wage growth hasn’t risen in New South Wales and Victoria. What’s more, labour market conditions in Queensland, Western Australia …
18th August 2017
The recent run of chunky rises in employment is helping to cushion the blow to households’ finances from record low wage growth. The past volatility of the data suggests it’s wise not to get too excited. But the recent improvement poses an upside risk to …
17th August 2017
The stagnation in wage growth at the record low of 1.9% in the second quarter supports our view that the low wage, low inflation climate will mean the RBA won’t raise interest rates next year as the financial markets expect. With households’ real wages …
16th August 2017
History may be turned on its head over the next decade with Australia and New Zealand experiencing lower inflation rates than some of their peers. It follows that their exchange rates may be weaker than otherwise and their government bonds yield may be …
15th August 2017
The surge in business confidence in Australia has made us a little more upbeat on the outlook for business investment. But with households showing some signs of struggling, a bit more investment won’t prevent GDP growth from falling short of most people’s …
11th August 2017
Graeme Wheeler didn’t go out with a bang at his last policy meeting as Governor of the Reserve Bank of New Zealand as interest rates were left at 1.75% for the ninth month in a row. But he stressed more strongly than before that rates are unlikely to rise …
10th August 2017
The fall in consumer confidence to a 16-month low in August widens the disparity between glum households and gleeful businesses. With confidence at a level consistent with a slowdown in consumption growth to just 2.0%, we think the hardships households …
9th August 2017
The Australian economy is entering a new phase where the drag on GDP growth from mining investment is coming to an end, but the boosts to growth from dwellings investment and consumption are starting to fade. The net result is that GDP may rise by only …
7th August 2017
The financial markets need to wake up to the fact that there is going to be fewer interest rate changes than in the past and more policy inertia. This is very much a global development, but the trend is more acute in Australia and New Zealand. The lower …
4th August 2017
The Reserve Bank of Australia’s new forecasts infer that it doesn’t think a dollar of US$0.80 will knock the economy off course. In fact, its new forecast that underlying inflation will rise to the 2-3% target a bit sooner implies that interest rates may …
The Reserve Bank of New Zealand will probably strike a dovish tone after leaving interest rates on hold at 1.75% at the policy meeting on Thursday 10th August, partly due to the softer economic news and partly because it doesn’t want to give the rising …
3rd August 2017
The fall in the trade surplus from a record high of $4.6bn in December to just $0.9bn in June is not a disaster as a lot of it is due to lower prices rather than lower export volumes. But the recent rise of the dollar to US$0.80 threatens to wipe out the …
Even though the Reserve Bank of Australia today decided not to try and talk the dollar down after it left interest rates at 1.5%, we still think the dollar will eventually weaken from US$0.80 now to around US$0.70. We believe that subdued GDP growth will …
1st August 2017
After a soft patch at the beginning of this year, jobs growth has soared in Australia in recent months. What’s more, of the net new 154,000 jobs that have been created since March all of them have been full-time ones. And business surveys remain …
31st July 2017
Most people are right to believe that their inflation rate is not 1.9% as the official ABS data show. As different people spend different shares of their income on different items than the ABS assumes, their own inflation rates are different. But most …
28th July 2017
The Reserve Bank of Australia will almost certainly keep interest rates on hold at 1.5% when it meets next Tuesday 1 st August, and we expect it to retain its fairly upbeat view on the outlook for the economy when its latest forecasts are published in …
27th July 2017
The RBA will probably look through the decline in headline inflation in the second quarter, especially given that underlying price pressures were slightly stronger than it had anticipated. That said, we believe underlying inflation will remain subdued for …
26th July 2017
GDP growth was weaker than anticipated at the start of the year, but the pick-up in our New Zealand Activity Proxy (NZAP) in May is consistent with a bounce back in the second quarter. At this stage, we expect that GDP growth accelerated from 0.5% q/q in …
25th July 2017
The recent rise in the Australian dollar to a two-and-a-half year high of just under US$0.80 has been meteoric. But while the dollar may orbit around that level for a bit, we don't think it will be too long before a reassessment of the outlook for …
21st July 2017
The surge in full-time jobs in June is likely to fuel growing expectations that the RBA will begin to raise interest rates by the first half of 2018. But despite this latest improvement there is still plenty of excess capacity in the labour market, which …
20th July 2017
The weaker tone of the inflation data for the second quarter has already caused the New Zealand dollar to weaken back below US$0.73 and the dollar may yet fall below US$0.70 as the markets realise that a lack of price pressures will prevent the RBNZ from …
18th July 2017
The gap between consumer and business confidence has widened further in recent months as rising profits have made firms increasingly optimistic while subdued wage growth has kept households pessimistic. We expect this gap to narrow in the coming months, …
14th July 2017
While the Westpac measure of consumer confidence nudged up in July, it remains below the long-run average and is consistent with a further slowdown in real consumption growth ahead. … Australia Consumer Confidence …
12th July 2017
While we expect that overall consumption growth will slow further this year and remain subdued in 2018 as well, not all areas of spending are equally vulnerable. Past behaviour suggests that spending on mobile phones, rent and transport will fare best. …
10th July 2017
The rising level of household debt in Australia presents a clear risk to the economic outlook and helps in part to explain why we expect the pace of consumer spending to slow this year. What’s more, given the risk it poses to financial stability, it is a …
7th July 2017
The trade surplus bounced back in May as coal exports returned to more normal levels following a sharp fall in April as a result of disruptions caused by Cyclone Debbie. As such, at this stage it appears that net exports may have made a neutral …
6th July 2017
The Reserve Bank of Australia (RBA) left interest rates on hold at 1.5% for the tenth consecutive meeting today and retained its fairly optimistic tone on the outlook for economic growth in the accompanying statement. Nonetheless, we expect rates will …
4th July 2017
