Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
A faster rise in interest rates in the US than widely expected next year will provide a welcome boost to the economies of Australia and New Zealand by leading to a further depreciation of their currencies. This will especially be the case if, as we …
18th September 2015
The disappointingly soft rebound in GDP in the second quarter supports our below consensus forecasts that the economy will grow by just 2.0% this year and that the RBNZ will cut interest rates from 2.75% now to just 2.0% by early next year. … New …
17th September 2015
Even though we expect both the Australian and New Zealand dollars to weaken further, to around US$0.60 and US$0.55 respectively, this won't be enough to prevent GDP growth in both economies from slowing to 2.0% this year and staying there next year too. …
16th September 2015
While the risks to our forecast that the central banks of Australia and New Zealand will eventually reduce interest rates to new record lows of 1.5% and 2.0% respectively (from 2.0% and 2.75% now) are clearly on the upside, those risks are not yet big …
10th September 2015
Another healthy gain in employment in August, as well as a slight fall in the unemployment rate, continued the strong run of Australia’s labour market. The slowdown in GDP growth this year may still feed through into weaker employment growth, but for now …
The most important part of today’s policy announcement by the Reserve Bank of New Zealand is not the third consecutive 0.25% cut in interest rates, to 2.75%, but the Bank’s growing acceptance that a marked economic slowdown is underway. Even so, we still …
Our view that the annual rate of GDP growth in Australia will slow further in the second half of the year suggests that the Australian dollar may yet weaken from its current six-and-a-half-year low of US$0.70 to US$0.65, if not to US$0.60. This would …
4th September 2015
The Reserve Bank of New Zealand (RBNZ) is all but guaranteed to cut interest rates by 0.25% for the third meeting in a row, from 3.00% to 2.75%, on Thursday 10th September. We wouldn’t completely rule out a 0.50% reduction. Either way, we suspect that …
3rd September 2015
Australia's economy slowed sharply in the second quarter, increasing the chances that growth will fall short of the Reserve Bank of Australia's forecasts for this year and next. Given this, rate cuts could soon come back onto the agenda. … Australia GDP …
2nd September 2015
While the Reserve Bank of Australia’s (RBA) decision to leave interest rates on hold at 2.0% for the fourth meeting in row suggests that the chances of further rate cuts have faded further, we still wouldn’t rule out rates being reduced again, perhaps …
1st September 2015
While it is hard to describe any of the recent news on investment in Australia as “good”, the latest figures were not as bad as we had feared. In particular, the plunge in commodity prices does not appear to be spilling over into much weaker investment …
28th August 2015
The continued resilience of the labour market in Australia is the main reason why the Reserve Bank of Australia (RBA) has become less inclined to cut interest rates again. Jobs growth remained strong in July and, notwithstanding what looks like a …
27th August 2015
The Reserve Bank of Australia (RBA) is odds on to leave interest rates on hold at 2.0% at the meeting scheduled for Tuesday 1 st September and the chances of further rate cuts are diminishing. A number of events, however, could prompt the RBA to change …
26th August 2015
While we remain more concerned than most about the Australian economy, we don’t think that the recent sharp falls in equity prices will filter through into much weaker investment or consumption. … Equity price falls don’t materially alter economic …
24th August 2015
Our estimated Taylor Rule shows that the Reserve Bank of New Zealand (RBNZ) is keeping interest rates lower than current economic conditions would usually warrant in an effort to boost inflation. If the economy weakens as we expect, then this implies that …
21st August 2015
Our new Capital Economics New Zealand Activity Proxy (CE NZAP) provides a timely guide to changes in economic activity in New Zealand well ahead of the official GDP data and is a useful barometer of the extent of the current slowdown in GDP growth. … …
20th August 2015
While in the long-term we expect that services exports will play a big role in filling the hole in the economy left by mining, in the near-term the problem is that a lot of the boost to services exports from the weaker dollar has already been felt. … …
14th August 2015
While our analysis suggests that it is the surprising leap in the unemployment rate in Australia in July that is sending the false signal and not the surprising strength of employment growth, there are still reasons to believe that the labour market will …
7th August 2015
Another sizeable gain in Australian employment in July has continued the remarkably strong run of recent months. However, today's data also showed a sharp rise in labour force participation, which has pushed the unemployment rate back up to its joint …
6th August 2015
The Reserve Bank of Australia’s decision to leave interest rates on hold at 2.0% for a third consecutive month appears to diminish the chances that rates will eventually fall to 1.5% as we have been forecasting. Nonetheless, we doubt that 2.0% will mark …
4th August 2015
Australia’s potential growth rate has probably slowed to around 2.75% from the 3.00% to 3.25% that the Reserve Bank of Australia has assumed for many years. While this may decrease the Bank’s desire to drop rates below 2.0%, at least in the near-term, our …
31st July 2015
It looks as though the Reserve Bank of Australia (RBA) will break this year’s pattern of cutting interest rates at meetings that are followed by the release of the Statement on Monetary Policy by leaving rates on hold at 2.0% at the meeting scheduled for …
29th July 2015
The latest weakening of the Australian and New Zealand dollars to new six-year lows of US$0.73 and US$0.65 respectively are a windfall for the Reserve Banks of Australia and New Zealand who want to boost activity and inflation without throwing more fuel …
27th July 2015
The muted rise in import prices over the past year despite the near-15% fall in the Australian dollar suggests that the weaker dollar won’t boost underlying inflation by as much as the Reserve Bank of Australia is expecting. In fact, we suspect that the …
24th July 2015
The 0.25% reduction in interest rates, to 3.00% from 3.25%, announced by the Reserve Bank of New Zealand today is the second in a series of cuts that we think could take interest rates all the way down to 2.0%. That would be consistent with the dollar …
23rd July 2015
The rise in Australia's headline consumer price inflation in the second quarter will not trouble the Reserve Bank of Australia (RBA), given that it largely reflects a rebound in petrol prices. Instead, further evidence that underlying price pressures are …
22nd July 2015
Some simple but effective analysis proves that pretty much all of the recent rise in Australian business confidence relative to consumer confidence can be explained by the recent weakening in the dollar. Our forecast that the dollar will fall further …
17th July 2015
In a change to our previous forecast, we now expect that the Reserve Bank of New Zealand (RBNZ) will cut interest rates by 0.5%, to 2.75%, at the policy meeting scheduled for Thursday 23rd July and that rates will be cut further to 2.0% by the end of the …
16th July 2015
The continued low level of both headline and core CPI inflation in New Zealand in the second quarter all-but guarantees that the RBNZ will cut interest rates to 3.00% at next week’s policy meeting, and probably to 2.75%, if not below, later in the year. …
While much of the weakness in GDP growth in New Zealand in Q1 was due to the temporary effect of the drought, more recent data suggest that the slowdown is spreading to other sectors. The risks to our forecast that growth will slow from 3.3% last year to …
14th July 2015
Since the recent sharp weakening in both the Australian and New Zealand dollars is being driven by the deteriorating economic outlook for each economy, the depreciating currencies are unlikely to provide a major boost to either GDP growth or inflation. As …
10th July 2015
Even though the Reserve Bank of Australia (RBA) decided to leave interest rates on hold at 2.0% for the second month in a row today and did not provide a clear hint that more cuts lie ahead, we still think that a further weakening in the outlook will …
7th July 2015
Since most of the recent sharp widening in Australia’s trade deficit is because commodity prices have reduced export values rather than due to outright falls in export volumes, net trade probably still made a positive contribution to real GDP growth in …
3rd July 2015
The Australian economy would be largely untouched even if the current problems in Europe culminated in a widespread financial crisis and another euro-zone recession. That said, if the Reserve Bank of Australia finds itself debating whether or not to cut …
2nd July 2015
The mixed tone of the data released since the Reserve Bank of Australia’s (RBA) last policy meeting probably isn’t enough to spur the Bank to cut interest rates from 2.0% at the meeting scheduled for Tuesday 7 th July. The wildcard is the crisis in the …
1st July 2015
The Australian labour market appears to be coping surprisingly well with the end of the mining boom. However, we suspect that the recent data overstate the strength of the labour market. Moreover, if the economy slows sharply this year, as we expect, then …
26th June 2015
While consumption growth in Australia held up well in the first quarter, there is little chance that an increase in household spending will prevent the economy from slowing. Employment and wage growth look set to weaken in the second half of the year, …
25th June 2015
The Reserve Bank of Australia’s (RBA) repeated statements that it is still open to further rate cuts, depending on the incoming data, have not changed the view of some that 2.0% marks the floor for rates in Australia. But we remain confident that rates …
19th June 2015
The sharp slowdown in New Zealand's economy in the first quarter was partly down to the temporary impact of a drought on the agricultural sector, but there are a number of other factors that will keep growth weak during the rest of the year. … New …
18th June 2015
Policymakers and the markets are too complacent in thinking that the slowdowns in GDP growth in both Australia and New Zealand will be modest and short-lived. In contrast, we believe that growth in Australia will slow sharply from 2.7% last year to 2.0% …
16th June 2015
The decision by the Reserve Bank of New Zealand (RBNZ) to cut rates to 3.25% leaves our prediction that rates will be 3.0% by the end of the year on track and has helped achieve one of our other forecasts, namely a weakening in the New Zealand dollar to …
12th June 2015
While today's interest rate cut by the Reserve Bank of New Zealand (RBNZ), to 3.25% from 3.50%, came a bit earlier than we expected, towards the start of the year we were one of the few analysts expecting rates to fall at all. A further cut in rates to …
11th June 2015
The 42,000 gain in Australian employment in May will no doubt add to claims that Australia’s economy has weathered the end of the mining boom well. However, the reading almost certainly exaggerates the strength of the labour market, while the sharp drop …
While the Australian economy may have shot out of blocks at the start of the year, there are good reasons to think that it will soon run out of puff. Indeed, April’s data suggest that the boosts to activity from the fall in oil prices and the surge in …
5th June 2015
We expect that the Reserve Bank of New Zealand (RBNZ) will use the policy meeting scheduled for Thursday 11 th June and the publication of the accompanying Monetary Policy Statement to further prepare the ground for a rate cut in either July or September. …
4th June 2015
Australia's economy grew at a very healthy rate in the first quarter, which will probably prompt some suggestions that it has weathered last year's fall in commodity prices well. We think the worst is still to come. The end of the mining investment boom …
3rd June 2015
We suspect that today’s decision by the Reserve Bank of Australia (RBA) to leave interest rates on hold at 2.0% is nothing more than a pause in the loosening cycle that could yet result in rates falling to 1.5% by the end of the year. Such a move would …
2nd June 2015
It is possible that at some point in the next couple of years, Australia will lose its AAA credit rating. While this would be a huge blow for whichever political party is in power at the time, it wouldn’t be a big deal for the economy or the financial …
29th May 2015
While the Reserve Bank of Australia (RBA) is highly likely to leave interest rates on hold at 2.0% at its policy meeting on Tuesday 2 nd June, we think it will cut rates further later this year. Our forecast that rates will be reduced by 0.25% at the …
26th May 2015
The bounce in consumer confidence in Australia triggered by the Budget will probably be temporary and won’t prompt households to flock to the shops. Even a Budget-related increase in business confidence is unlikely to translate into faster investment and …
22nd May 2015
