Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Today’s announcement by the Reserve Bank of New Zealand (RBNZ) that it intends to ease existing loan-to-value (LVR) restrictions from the start of next year should provide a modest boost to housing demand. But the new coalition government’s tighter …
29th November 2017
Recent comments by Governor Lowe about the outlook for monetary policy all but confirmed that the Reserve Bank of Australia will leave interest rates at 1.5% at its final policy meeting of the year on Tuesday 5th December, and probably for a good while …
While the sustained pick-up in employment growth so far this year provides some reason for optimism about consumer spending in the all-important Christmas period, on balance the evidence suggests that this holiday season is unlikely to provide any …
24th November 2017
The decline in our New Zealand Activity Proxy (NZAP) in September suggests that the easing in GDP growth over the past year continued in the third quarter. … New Zealand Activity Proxy …
20th November 2017
If the Reserve Bank of Australia were to learn from its recent forecasting failures, it would conclude that the unemployment rate will continue to fall by more than it expects but that underlying inflation still won’t rise much. Such a lesson could …
17th November 2017
While employment growth came off the boil in October, the labour market still appears to be simmering along nicely. The problem is that this has yet to translate into faster growth of retail sales and wages. … Australia Labour Market …
16th November 2017
Wage growth for the majority of workers may have slowed further in the third quarter as the entire rise from 1.9% in the second quarter to 2.0% was probably due to the larger-than-usual increase in the minimum wage on 1st July. The takeaway is that there …
15th November 2017
Over the next few years we expect that the relative performance of the largest states in Australia will converge, as the mining-exposed states of Queensland and Western Australia benefit most from the improving outlook for business investment and New …
10th November 2017
The Reserve Bank of Australia admitted in today’s Statement on Monetary Policy that underlying inflation will be below its 2-3% target for a year longer than it previously thought. We have been saying as much for over a year and we think the RBA may end …
More interesting than the Reserve Bank of New Zealand (RBNZ) having now left interest rates unchanged at 1.75% for a year was the Bank’s verdict on the impact of the new government. It believes that GDP growth will be fast for longer, inflation will be …
8th November 2017
Although the Reserve Bank of Australia (RBA) left interest rates at 1.5% for the 15 th month today, we don’t think it is placing enough weight on the recent weakening in retail sales and softer news on inflation. If GDP growth and underlying inflation …
7th November 2017
The new CPI spending weights suggest that inflation will be 0.2 percentage points lower than otherwise over the next two years and therefore support our view that underlying inflation will stay below the 2-3% target rate until 2020. This will make it even …
6th November 2017
The stagnation in house prices in Australia in recent months is a big deal as it means housing won’t support the economy by as much as in recent years. The plunge in the number of home sales will continue to restrain spending on items like fridges and …
3rd November 2017
The fact that real retail were broadly stable in the third quarter even though retailers offered more discounts than usual shows just how unwilling households are to take their wallets out of their pockets. We suspect that a slowdown in consumption growth …
The Reserve Bank of New Zealand will leave interest rates at 1.75% at the policy meeting on Thursday 9th November and by adopting a more cautious tone in the accompanying Monetary Policy Statement it will again warn the financial markets that they are …
2nd November 2017
The rises in the international trade surplus and the number of building approvals in September are both encouraging signs as they highlight the growing importance of services exports and the recent stabilisation in building activity. Even so, overall GDP …
We think the financial markets are right to pare back their expectations of how far interest rates will rise next year. Admittedly, we expect that after leaving rates at 1.5% at the meeting on Tuesday 7th November, the forecasts the Reserve Bank of …
1st November 2017
As the surges in employment and wages in the third quarter are a little bit of a statistical mirage, we are not convinced that the resulting strengthening in the dollar to US$0.69 will be sustained for long. With GDP growth now close to a peak, the pace …
31st October 2017
Despite the sustained strengthening in the Australian labour market, retail sales have been unusually weak in recent months. Admittedly, some of this weakness can be explained by weak price pressures. Nevertheless, households are clearly struggling under …
Australia and New Zealand will probably stand out from the crowd next year as interest rates stay at their respective record lows of 1.50% and 1.75% while rates are raised in some other advanced economies. This divergence may contribute to the Australian …
30th October 2017
Australia’s third-quarter inflation data highlighted that inflation is highest for the items where prices are influenced by government decisions and inflation is lowest for the items where prices are set by market forces. Our measure of market forces …
27th October 2017
The surge in electricity and gas prices in the third quarter will garner a lot of attention, but the drop back in the headline inflation rate from 1.9% to 1.8% underlines that price pressures remain remarkably subdued across large parts of the economy. …
25th October 2017
The bounce back in our New Zealand Activity Proxy (NZAP) in August is encouraging, but the weak start to the third quarter means GDP growth may still be slowing. We expect GDP growth to rebound to about 3.0% next year, but some of the policies proposed by …
24th October 2017
Although much attention will fall on the release of the third-quarter Australian inflation figures next week, the reweighting of the CPI basket in the fourth-quarter will be more significant as it will probably show that the true rate of inflation is …
20th October 2017
We are not yet changing our forecasts for GDP growth, inflation, interest rates or the dollar due to the news that a Labour-NZ First-Greens coalition led by Jacinda Ardern will form the next government, but the less growth-friendly policies of those …
19th October 2017
The larger than expected rise in employment in September marks the seventh consecutive month of strong job gains in Australia and leaves little doubt about the current health of the labour market. That said, we don’t think this will prompt a notable …
The modest rise in headline and underlying price pressures in the third quarter doesn’t dramatically alter the outlook for interest rates, but at the margin it indicates that rates may rise a little bit earlier than the RBNZ’s current suggestion of …
17th October 2017
While we are becoming more optimistic on the outlook for non-mining business investment in Australia following years of disappointing growth, we doubt the pick-up will be as strong as business surveys currently suggest. Instead, over the next few years we …
13th October 2017
We believe the financial markets have gone too far by pricing in a strong possibility that the Reserve Bank of Australia will raise interest rates twice next year, from 1.5% to 2.0%. Economic conditions won’t be good enough to warrant higher rates and …
12th October 2017
The Westpac measure of consumer confidence leapt to its highest level in a year in October, which was a welcome sight given the recent run of weak data on household spending. That said, we remain concerned about the outlook. … Australia Consumer …
11th October 2017
The sizeable pick-up in employment growth in recent months presents an upside risk to our forecast that consumption growth will slow notably this year. But in light of the other headwinds restraining household income, we doubt it will prevent the annual …
9th October 2017
The recent slump in retail sales in Australia suggests that the slowdown in consumption growth that we have been warning about is underway. But it’s not a disaster for the economy as an associated softening in imports of consumption goods means that the …
6th October 2017
The net result of the retail sales and international trade data for August isn’t a disaster for the overall economy. But the weakness in retail sales supports our long-held view that a slowdown in consumption growth is one reason why the RBA won’t raise …
5th October 2017
The Reserve Bank of Australia may have left interest rates at 1.5% for the 14th month today, but its growing confidence in the outlook for activity and inflation may mean it will be prepared to signal early next year that it’s getting close to raising …
3rd October 2017
While leading labour market indicators in Australia continue to point a decent pace of employment growth ahead, it is not just the rate of jobs growth that matters but also the composition. And at this stage it appears that future jobs growth may well be …
29th September 2017
The encouraging signs about the health of the Australian economy have continued over the past month, with employment growth gathering pace and the outlook for business investment improving. (See Chart 1.) The economic outlook has clearly improved and GDP …
28th September 2017
There remains plenty of uncertainty around the formation of the next government and who will be the next permanent Governor of the Reserve Bank of New Zealand, but the one consistency is the dovish message that the RBNZ sent today after leaving interest …
27th September 2017
Following the bounce back in GDP growth last quarter, the decline in our New Zealand Activity Proxy (NZAP) in July suggests that the economy lost some momentum at the start of the third quarter. That said, a sharp slowdown seems unlikely. … New Zealand …
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
