Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
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
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
