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The 26,100 rebound in employment in March is something of a relief given the stagnation in the previous three months. With the unemployment rate falling from 5.8% to 5.7%, the labour market appears in reasonable shape. … Australia Labour Market …
14th April 2016
The further fall in the Westpac measure of consumer confidence in April suggests that the apparent weakness in consumption growth in the first quarter may continue into the second. It also hints that the recent slowing in employment growth may be the …
13th April 2016
While exports of services will continue to grow rapidly over the next decade, they won’t boost GDP by anywhere near as much as resources exports have. For that to happen, countries such as China and India would need to develop at a blistering pace and …
The Reserve Bank of Australia should be applauded for resuming its attempts to talk down the dollar as the evolution of the currency will have a crucial influence on the outlook for both economic growth and underlying inflation. It’s even more important …
8th April 2016
We were right to suggest that, while leaving interest rates on hold at 2.0% today, the Reserve Bank of Australia would use the policy statement to try to talk the dollar down. Whether or not this will work is another matter. In the financial markets, …
5th April 2016
The unexpected widening in the international trade deficit in February and revisions to past data suggest that GDP growth may have slowed sharply in the first quarter. This makes it more important for the RBA to do try and reverse the recent strengthening …
Although February’s building approvals data were broadly in line with expectations, retail sales were much weaker than expected and suggest that real consumption growth may have slowed notably in the first quarter of the year. This is unlikely to prompt …
4th April 2016
We can’t rule it out completely, but recent suggestions that Australia is the second most likely country in the world to suffer a debt crisis and recession in the next one to three years seem overblown. The level of household debt isn’t as high as it …
1st April 2016
While the Reserve Bank of Australia will almost certainly leave interest rates at 2.0% at the policy meeting on Tuesday 5th April, it may try to give activity and inflation a boost by attempting to talk down the Australian dollar. In any case, we believe …
30th March 2016
The resurgence in Australia’s housing market at the start of this year is already looking a bit tired. The delayed impact on activity from last year’s rises in mortgage rates, the recent deterioration in sentiment towards housing and the overhang of …
24th March 2016
More worrying than the 0.5% q/q seasonally adjusted fall in the ABS measure of Australian house prices in the fourth quarter of last year (+0.2% q/q unadjusted) is that the subsequent rebound is already running out of steam. After rising by an impressive …
22nd March 2016
There is not enough evidence to conclude that the recent sharp slowdown in employment growth in Australia is due to fears over the health of the global economy rather than statistical noise. This year’s Census and probable Federal Election will mean that …
18th March 2016
The recent stagnation in employment is probably just payback from the unjustified strength late last year rather than a sign that fears over the global economy have prompted businesses to postpone hiring. When taken together with the fall back in the …
17th March 2016
The surprisingly strong rise in GDP in the fourth quarter of last year won’t prevent the RBNZ from cutting interest rates from 2.25% to 2.00% in the coming months, although it does make it a little less likely that rates will fall below 2.00%. … New …
The recent interest rate cut in New Zealand and the dovish comments by the RBNZ now mean it is easy to imagine a scenario where interest rates in New Zealand fall below those in Australia. That would result in the New Zealand dollar weakening further …
11th March 2016
Today’s 0.25% cut in interest rates in New Zealand, to 2.25% from 2.50%, will have been a surprise to most analysts and the financial markets. But as early as July last year we forecast that rates would be cut to 2.0% this year and in the RBNZ Watch we …
10th March 2016
The relatively small fall in the Westpac measure of consumer confidence in March should be considered a fairly good result when set against the extent of the weakness in the financial markets earlier in the year. With the markets and commodity prices now …
9th March 2016
The strengthening in the Australian dollar to an eight-month high of US$0.74 has left it at a level that poses a serious threat to the economic outlook. This may prompt the RBA to resume its campaign to talk the dollar down and, if that fails, force it to …
7th March 2016
Even though it has faced a very testing set of circumstances, Australia has continued to outperform most of its peers and hasn’t done too bad by its own standards either. A lot of the credit needs to go to households, who picked up the baton of growth …
4th March 2016
Retail sales in January were slightly weaker than expected and suggest that consumption growth may have softened at the start of the year. Nonetheless, there is little evidence that the turmoil in financial markets is prompting households to keep their …
Although we suspect that the Reserve Bank of New Zealand will want to keep its powder dry for a little longer, there’s a real chance it will surprise the markets and cut interest rates by 0.25% at the policy meeting on Thursday 10th March. If it does …
3rd March 2016
The unexpectedly large narrowing in the international trade deficit in January suggests that the resurgence in the Australian economy in the second half of last year may have continued at the start of the year. … Australia International Trade …
The news that the economy grew by 0.6% q/q late last year will reassure the RBA that it has been right to resist calls to cut interest rates further. That said, it might not be long before the RBA becomes concerned about the outlook for growth this year. …
2nd March 2016
The Reserve Bank of Australia today once again decided to leave interest rates at 2.0%, but we don’t think it will be long before a weakening in the economic outlook and a further fall in underlying inflation forces it to cut rates to 1.5%. When other …
1st March 2016
While it is a bit dramatic to suggest that a global currency war is underway, the falls in interest rate expectations in overseas markets relative to those at home explains why the Australian dollar has strengthened to a six-week high of US$0.72. The RBA …
26th February 2016
Although the fourth quarter Australia private capital expenditure data were stronger than expected, the disappointing estimates of future capital expenditure will be concerning for the Reserve Bank of Australia. … Australia Private Capital Expenditure …
25th February 2016
The turmoil in financial markets, the stagnation in employment growth and the recent rises in bank lending rates to businesses are unlikely to have spooked the Reserve Bank of Australia by enough to prompt it to cut interest rates at the policy meeting on …
24th February 2016
The slump in equity prices since the turn of the year is unlikely to be followed by a similar slump in economic growth in Australia, especially now that equity prices are rebounding. Over the past 20 years the equity market has been a poor predictor of …
23rd February 2016
With equity prices still more than 10% below last year’s highs, employment having contracted for two months in a row and leading economic indices slumping, a visitor from Mars would be forgiven for thinking that the Australian economy is in recession. The …
19th February 2016
The further fall in employment in January is probably just a continuation of the data moving back to reality after the unbelievable strength late last year rather than a sign that the concerns over the global economy are giving Australian employers the …
18th February 2016
The resilience of both business and consumer confidence in Australia suggests that the latest sharp falls in equity prices are unlikely to lead to much weaker investment or consumption. This is mainly because the large drop in petrol prices has left …
12th February 2016
The rise in the Westpac measure of consumer confidence in February is particularly impressive given how far equity prices have fallen. It suggests that the strong labour market and fall in petrol prices is allowing households to shrug off the woes of the …
10th February 2016
Our full analysis of the prospects for the Australian and New Zealand economies is contained in our Australia & New Zealand Economic Outlook (sent to clients on 27th January), but in this note we highlight our most important non-consensus calls and …
The record level of net migration appears to explain around half of the rise in real consumption in New Zealand in the past two years. If net migration slows steadily as is widely expected, then this support should fade only gradually. But there’s a risk …
9th February 2016
At least some of the startling fall in the unemployment rate in New Zealand in the fourth quarter of last year, from 6.0% to 5.3%, appears genuine. As such, we no longer think that the unemployment rate will climb to a peak of 6.3%. While this reduces the …
5th February 2016
The Reserve Bank of Australia’s February Statement on Monetary Policy confirms that the chances of a near-term reduction in interest rates remains slim. Nonetheless, there are a number of factors that could yet alter the outlook and prompt the RBA to cut …
December’s weaker than expected retail sales figures suggest that retailers had a disappointing Christmas period and that consumer spending has lost some momentum. As a result, we’ve revised down our estimate for fourth-quarter consumption growth and now …
The sharp falls in equity prices since the turn of the year are unlikely to prompt households or businesses to rein in their spending. In fact, when set against some measures of domestic activity, it looks as though equity prices may have fallen too far. …
4th February 2016
December’s international trade and building approvals data cast doubt on the RBA’s view that there are “reasonable prospects for continued growth in the economy”. This is especially the case when overseas demand could yet weaken further and when the …
3rd February 2016
The astonishing plunge in the unemployment rate in the fourth quarter of last year, to a six-year low of 5.3% from 6.0% in the third quarter, decreases the chances that the RBNZ will reduce interest rates further. … New Zealand Labour Market …
While the Reserve Bank of Australia acknowledged the threat posed by a weaker global economy when it left interest rates on hold at 2.0% today, we don’t think it went far enough. With the outlook for underlying inflation at home also softening, we …
2nd February 2016
It’s odd that the financial markets placed so much emphasis on the rise in Australia’s tradables inflation rate in the fourth quarter of last year when this was more than offset by a fall in non-tradables inflation. What’s more, there are good reasons to …
29th January 2016
The Reserve Bank of New Zealand’s hint that the weakening outlook for inflation means that interest rates may have to be reduced this year from the current rate of 2.5% supports our long-held view that rates will fall to 2.0%. The New Zealand dollar has …
28th January 2016
We continue to believe that GDP growth in both Australia and New Zealand won’t accelerate at all this year from last year’s disappointing rates of around 2.3%. A further weakening in the outlook for underlying inflation will also play a major role in …
27th January 2016
The rise in headline inflation in the fourth quarter of last year, to 1.7% from 1.5%, hides the more important easing in underlying inflation. On one measure, underlying inflation is now below the RBA’s 2-3% target range. We believe that further falls in …
The recent turmoil in financial markets will have brought a sudden end to Governor Stevens ’“chilled” Christmas period. But this won’t be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates at the policy meeting onTuesday 2nd …
25th January 2016
The higher starting point means that inflation in Australia is unlikely to fall close to zero, as it has done in New Zealand. That said, underlying or “core” inflation in Australia may soon follow in the footsteps of core inflation in New Zealand by …
22nd January 2016
While recent events have increased the chances that interest rates will be cut from 2.5% now to 2.0%, as we have been expecting for some time, we think that the Reserve Bank of New Zealand will hold fire at the policy meeting on Thursday 28th January. …
21st January 2016
The fall in CPI inflation to just 0.1% in the fourth quarter of last year, from 0.4% in the third quarter, could prove to be a game-changer for the RBNZ as it leaves the economy uncomfortably close to outright deflation. This may not quite be enough to …
20th January 2016
The latest falls in equity and commodity prices have not dealt a big blow to the Australian economy, especially when lower petrol prices are boosting households’ real incomes. Nonetheless, should equity and commodity prices continue to decline, then the …
15th January 2016
