Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
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
The recent divergence of the Australian and New Zealand dollars has been driven by swings in relative interest rate expectations, but we doubt it will be sustained. (See Chart below.) We think the markets are right to start pricing in rate cuts in New …
21st May 2015
The Reserve Bank of Australia and the Treasurer appear to be playing tennis with the economy. RBA Governor Stevens has already cut interest rates to 2.0% and hinted that he would like fiscal policy to provide more help. In last week’s Budget, Treasurer …
15th May 2015
The Reserve Bank of New Zealand’s (RBNZ) plan to tighten its macro-prudential polices in order to tame house price inflation in Auckland could be another sign that it is preparing the ground for a rate cut. As such, it supports our view that interest …
13th May 2015
The 2015-16 Budget will quash any talk of a credit rating downgrade, but won’t give the economy a much-needed helping hand. The decision by Treasurer Joe Hockey not reduce the coming fiscal squeeze increases the pressure on the Reserve Bank of Australia …
12th May 2015
Last week’s news that the unemployment rate in New Zealand is not falling as widely expected and is rising as we thought it might has added to the pressure on the Reserve Bank of New Zealand (RBNZ) to follow its Australian counterpart in cutting interest …
8th May 2015
While Tuesday’s Federal Budget may well live up to the “dull” label slapped on it by the Prime Minister, the failure to provide any extra support to the economy will be disappointing. This would place an even greater burden on the Reserve Bank of …
7th May 2015
The 2,900 drop in Australian employment in April brought to an end a strong run for the country's labour market and pushed up the unemployment rate. Although we would be wary of reading too much into monthly changes in such a volatile data series, we do …
The cut in interest rates to a new record low of 2.00%, from 2.25%, announced by the Reserve Bank of Australia (RBA) today is unlikely to be the last in this cycle. Our forecast that both GDP growth and underlying inflation will be weaker this year than …
5th May 2015
The Reserve Bank of Australia can’t have its cake and eat it. The only way to ensure that the Australian dollar weakens, which would support the real economy, is to reduce interest rates further, but this would boost the already hot housing market. We …
1st May 2015
Although the Reserve Bank of New Zealand (RBNZ) once again left interest rates unchanged today, theshift from a neutral policy bias to an implicit loosening bias supports our view that interest rates willbe cut from the current 3.5% to 3.0% by the end of …
30th April 2015
The recent stronger-than-expected data means that a cut in interest rates at the Reserve Bank of Australia’s (RBA) policy meeting on Tuesday 5 th May is no longer a done deal. But we still think the chances of a cut, to 2.00% from 2.25%, are greater than …
28th April 2015
While we agree that the Reserve Bank of Australia (RBA) is right to conclude that monetary policy is less effective now than before the global financial crisis, we disagree with suggestions that this means there's little point in cutting interest rates …
24th April 2015
