Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Although the labour market is probably a bit weaker than June’s figures suggest, we’re not too concerned when the forward-looking indicators remain healthy. That said, the high share of part-time employment suggests there is still plenty of spare …
14th July 2016
Much like financial markets and businesses, the Westpac measure of consumer confidence in July suggests that households have been largely unaffected by the significant political uncertainty domestically and abroad in recent weeks. … Australia Consumer …
13th July 2016
The New Zealand dollar may not to be able to defy gravity for much longer as a shrinking interest rate premium could drag it down from US$0.73 now to around US$0.65 by the end of the year. That would mean the kiwi is unlikely to reach parity against the …
12th July 2016
While we doubt that the loss of Australia’s AAA credit rating would be followed by a rise in borrowing costs for the government, states and banks, it would nonetheless highlight that the burden to support the economy and to boost inflation will remain on …
8th July 2016
S&P’s decision to revise Australia’s AAA credit rating from stable to negative is another political blow for the Coalition, but it doesn’t mean much for the financial markets, the States or the banks … Loss of AAA rating wouldn't raise borrowing …
7th July 2016
By leaving interest rates at 1.75% and not providing a very strong hint that they will be cut in August, the Reserve Bank of Australia today implied that the recent financial market volatility and political uncertainty has not altered the economic …
5th July 2016
Weaker-than-expected retail sales and international trade figures for May provide further evidence that GDP growth probably slowed sharply in the second quarter. This won’t be enough to persuade the RBA to cut rates at its policy meeting later today. … …
The fallout on the economy and financial markets from the uncertain outcome of the Federal election will probably be relatively mild and short-lived and is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50% at …
4th July 2016
Although the recent poor performance of equity prices means that household wealth may decline in the first half of the year, we doubt this will significantly restrain consumption growth. Households will probably just dip into their savings or borrow more …
1st July 2016
The unusually low rates of underlying inflation in both Australia and New Zealand will remain a thorn in the side of policymakers for a number of years yet. This explains why we believe that the Reserve Banks of Australia and New Zealand will both cut …
30th June 2016
The recent volatility in global financial markets triggered by the UK’s vote to leave the EU is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50% at its meeting on Tuesday 5th July. However, we still believe that …
29th June 2016
Last week’s vote by the UK to leave the EU isn’t a major threat to the Australian and New Zealand economies, especially when the resulting volatility in the financial markets appears to be fading. … Brexit not a major …
27th June 2016
The surprising lack of an easing bias in the minutes from the Reserve Bank of Australia’s June policy meeting could be interpreted as a signal that interest rates have reached a floor. However, we don’t think that this is the case and still believe that …
24th June 2016
While GDP growth was stronger than expected in Australia and New Zealand in the first quarter, this doesn’t alter our view that underlying inflation will remain low for a while yet. The Australian economy has operated below potential for a few years and …
22nd June 2016
The sharp falls in equity prices in Australia in response to the rise in the chance that the UK may vote to leave the EU seem overdone. A Brexit is unlikely to be a disaster for the global economy. And since Australia sends only 1% of its exports to the …
17th June 2016
May’s data suggest that the labour market is not too strong to prevent the Reserve Bank of Australia from cutting interest rates to 1.5% at its August meeting and not too weak to prompt it to become any more worried about the health of the economy. … …
16th June 2016
The rise in GDP in the first quarter doesn’t make the RBNZ any less likely to cut interest rates to 2.0% at the next policy meeting in August. And we believe that a combination of weaker GDP growth and persistently low inflation will mean that interest …
The rebound in consumer confidence following the RBA’s decision to cut interest rates in May was sustained in June. But since rate cuts tend to boost sentiment for only a couple of months, confidence may fall back before long. Nonetheless, annual …
15th June 2016
If the housing markets in both Australia and New Zealand remain strong, then our forecasts that interest rates will fall to 1.0% in Australia and to 1.75% in New Zealand would look out of reach. However, we suspect that tighter lending standards will take …
10th June 2016
Despite leaving interest rates at 2.25% today, the Reserve Bank of New Zealand still hinted that they may fall to 2.0% before long. What’s more, we still think there’s a chance that rates may have to decline to 1.75%, although not until very late this …
9th June 2016
It was no surprise after cutting interest rates in May that the Reserve Bank of Australia left rates on hold at 1.75% today. But by not sending a signal that rates will fall further, it has become a bit less likely that rates will be reduced to 1.5% in …
7th June 2016
The leap in GDP in Australia in the first quarter doesn’t significantly alter the outlook for underlying inflation, especially if we are right in thinking that economic growth will drop back below the economy’s potential rate later this year. This …
3rd June 2016
April’s international trade and retail sales data suggest that the spectacular rise in GDP in the first quarter is unlikely to be sustained in the second. Despite the narrowing in the trade deficit, net trade will struggle to match the strong …
2nd June 2016
The Reserve Bank of Australia is unlikely to follow May’s 0.25% interest rate cut to 1.75% with another reduction at the meeting on Tuesday 7th June. But we still believe that rates will be reduced to 1.5% at the August meeting and, in a change to our …
The Reserve Bank of New Zealand will almost certainly cut interest rates from 2.25% to 2.00% at its next policy meeting on Thursday 9th June. Although we don’t expect the RBNZ to signal this month that further rate cuts lie ahead, we think that rates will …
The surge in GDP in the first quarter means the RBA won’t be in a rush to cut interest rates again. But growth will slow during the rest of this year and we still think that continued low inflation will prompt the RBA to cut rates to 1.5%, probably in …
1st June 2016
It always seemed unlikely to us that non-mining investment would seamlessly fill the hole left by the plunge in mining investment. This is especially the case when the economy is saddled with a large amount of spare capacity, which means non-mining …
27th May 2016
Although the plunge in real private capital expenditure in the first quarter has led us to revise down our estimate for first-quarter GDP growth, from 0.8% q/q to 0.6%, the survey probably isn’t weak enough to prompt the RBA to follow the rate cut to …
Although GDP growth in Australia in the first quarter probably at least matched the 0.6% q/q rate in the fourth quarter of last year, the continued disappointment is the failure of non-mining investment to fill the hole left by the plunge in mining …
26th May 2016
A US-style collapse in house prices in Australia is unlikely when lending conditions during the good times have not been as loose as in America and Australian banks are better placed to cope with the bad times. Even so, we are more worried than most and …
23rd May 2016
Our forecasts that interest rates in Australia will remain low for longer than the markets expect while rates in the US will rise further than widely believed are consistent with government bonds in Australia outperforming US Treasuries. While Australian …
20th May 2016
Since the labour market remained healthy enough in April, the Reserve Bank of Australia doesn’t need to hit the panic button and cut interest rates again at the next meeting in June. We still think rates are more likely to be reduced to 1.5% at the …
19th May 2016
The decision by the Reserve Bank of Australia to cut interest rates to 1.75% and revise down its inflation forecasts is still causing waves, but what happens next largely depends on the evolution of inflation expectations. Our analysis suggests that …
13th May 2016
The rebound in the Westpac measure of consumer confidence in May appears to be a result of the RBA’s decision to cut interest rates last week, but history suggests this support may only be temporary. … Australia Consumer Confidence …
11th May 2016
Our success in forecasting ahead of everyone else that the Reserve Bank of Australia would cut interest rates below 2% is mainly because we realised that the legacy of a prolonged period of below potential growth would drag down underlying inflation. That …
6th May 2016
The Reserve Bank of Australia’s new forecast that underlying inflation will remain below the 2-3% target range until mid-2018 supports our view that interest rates will soon be cut by a further 0.25% to our long-held forecast of 1.5%. Governor-in-waiting …
March’s international trade and retail sales data suggest that a boost to GDP growth from net trade probably more than offset an easing in consumption growth in the first quarter. We estimate that real GDP growth accelerated from the fourth quarter’s 0.6% …
5th May 2016
The sharper-than-expected rise in the unemployment rate in the first quarter reversed half of the large decline at the end of last year and suggests that the previous improvement was more a mirage than a miracle. Given that wage growth also remained …
4th May 2016
While the Budget has been badged as focusing on “jobs and growth”, Treasurer Scott Morrison was clearly thinking about his own job and the probable Federal election on 2nd July when he crafted it. Morrison managed to give some money away before the …
3rd May 2016
Today’s decision by the Reserve Bank of Australia to cut interest rates from 2.0% to 1.75% will help solve the economy’s twin problems of too slow growth and too low underlying inflation. It also vindicates our decision to forecast that rates would fall …
Treasurer Scott Morrison will put Australia’s AAA credit rating at risk in Tuesday’s Federal Budget by revealing a net rise in spending in an attempt to gain favour ahead of the probable election on 2nd July. Even if this gamble pays off in the near-term, …
29th April 2016
The recent strength of both the Australian and New Zealand dollars means that interest rates will have to fall further than widely expected to solve the twin problems of too slow economic growth and too low underlying inflation. Our forecasts that GDP …
28th April 2016
We don’t believe that the slightly more positive tone of the policy statement released after the Reserve Bank of New Zealand left interest rates on hold at 2.25% today will prevent the Bank from cutting rates to 2.0% at the meeting in June. What’s more, …
We suspect that news of the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia to cut interest rates from 2.00% to 1.75% at its policy meeting on Tuesday 3rd May. But even if the Bank keeps rates …
27th April 2016
The sharp fall in underlying inflation to 1.5% in the first quarter is a game-changer for the Reserve Bank of Australia and supports our long-held view that interest rates will fall from 2.0% now to 1.5%. Rates may even be reduced to 1.75% at next …
The idea that households and businesses postpone their spending ahead of a Federal election is more fallacy than fact. Admittedly, there is some evidence that the uncertainty generated by an election leads businesses to reduce their investment …
22nd April 2016
We expect the Reserve Bank of New Zealand to cut interest rates by 0.25% to 2.00% at the meeting in early June rather than at the meeting on Thursday 28th April, although we wouldn’t completely rule out a cut next week. Either way, in a change to our …
21st April 2016
The recent rise of the Australian and New Zealand dollars will prevent GDP growth from strengthening this year and will keep core inflation at uncomfortably low levels. This is particularly true in Australia, where the dollar has reached a 10-month high …
20th April 2016
The rebound in CPI inflation in the first quarter increases the chances that the RBNZ won’t cut interest rates to 2.0% at next week’s policy meeting and will instead wait until the meeting in June. By then the RBNZ will know whether or not the rise in …
18th April 2016
Since the sharp declines in inflation expectations were the main reason why the Reserve Bank of New Zealand cut interest rates to 2.25% in March, future moves in inflation expectations will have a big bearing on whether or not rates eventually fall below …
15th April 2016
