Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Weak consumption adds to case for RBA pause The weakness in retail sales in April supports our view that the Reserve Bank of Australia is done hiking interest rates. Retail sales values were unchanged last month, a weaker result than the analyst consensus …
26th May 2023
The decision by the Reserve Bank of New Zealand to lift its official cash rate by 25bp, to 5.50%, was in line with what most had anticipated. However, with the Bank sounding more dovish than it has in the recent past, we think its hiking cycle is now …
24th May 2023
RBNZ signals tightening cycle is at an end The RBNZ slowed the pace of tightening this month, while signalling that its tightening cycle was at a close. The Bank’s decision to hike its official cash rate by 25bp, to 5.50%, was correctly predicted by 20 …
As in other advanced economies, Australia’s neutral rate of interest rate will probably edge up a bit over the coming decades. That will result in higher borrowing costs, but Australia’s low public debt levels mean that the government will be able to …
23rd May 2023
Productivity crunch creates dilemma for RBA The RBA has been ringing the alarm bells about dismal productivity gains for a while now. In the minutes of its May meeting, the Board noted that if productivity growth did not return to the modest pace recorded …
19th May 2023
The weakness in April’s jobs data suggest that the labour demand is starting to cool. Admittedly, there continue to be some pockets of resilience in the labour market. However, with wage growth remaining sluggish, we think it’s more likely than not that …
18th May 2023
Labour market will loosen further The labour market is showing signs of cooling, reinforcing our view that the RBA’s tightening cycle is over. The 4,300 fall in employment in April was much weaker than most had anticipated (Refinitiv Consensus: +25k, …
The RBNZ will lift its OCR by 25bp next week. With upside risks to inflation persisting, we’ve pencilled in another 25bp hike in July. However, we still think the Bank will pivot to rate cuts by year-end. The latest data don’t tell a compelling story as …
17th May 2023
Sluggish wage growth suggests RBA is done tightening The Q1 wage price index showed that quarterly wage gains were a bit softer than the RBA had anticipated which supports our view that the Bank won’t raise interest rates any further. The 0.8% q/q rise in …
The RBA’s balance sheet has barely shrunk since it decided to stop reinvesting the proceeds from maturing bonds. While pressing ahead with quantitative tightening would make it easier for the Bank to engage in quantitative easing during future downturns, …
16th May 2023
RBA retains its tightening bias The minutes of the RBA’s May meeting were on the hawkish side, but we still think that the Bank’s tightening cycle is already over. Although the Board discussed the option of leaving the cash rate unchanged, it ultimately …
Australia’s house prices have rebounded over the last couple of months and most leading indicators suggest that the recovery has legs. However, we doubt that a sustained recovery is on the cards. While false dawns in the housing market are rare, they did …
15th May 2023
Treasury won’t go on a spending spree Earlier this week, the Australian government boasted its first budget surplus in fifteen years. However, the picture in New Zealand is less rosy. The kiwi nation’s fiscal accounts are in worse shape than the …
12th May 2023
The 2023/24 Budget unveiled yesterday by Treasurer Jim Chalmers was something of a mixed bag. On the one hand, the modest spending measures proposed by the government will not break the bank, thanks in large part to the government’s commodity-driven tax …
10th May 2023
Wage pressures bubbling up Data released earlier in the week showed that pay increases under newly-inked enterprise bargaining agreements (EBAs) have started to surge in Australia. Employees covered by new EBAs received an annualised pay hike of 3.0% in …
5th May 2023
Net exports won’t have boosted GDP in Q1 The widening of the trade surplus in recent months belies the negligible contribution that net exports will have made to Q1 GDP. Indeed, we think the weakness in import values last quarter primary reflected …
4th May 2023
Net exports won’t have boosted GDP in Q1 The wide trade surplus belies the negligible contribution made by net exports to Q1 GDP. The widening of the trade surplus to $15.3bn in March, from an upwards-revised $14.2bn in February, was in contrast to what …
Weakness in consumption growth While retail sales values rose at a decent pace in March, we estimate that sales volumes fell the most since 2021’s lockdowns last quarter and that weakness has further to run. That in turn should prevent the Reserve Bank of …
3rd May 2023
Weakness in consumption growth will deter RBA from further rate hikes While retail sales values rose at a decent pace in March, we estimate that sales volumes fell the most since 2021’s lockdowns last quarter and that weakness has further to run. The 0.4% …
Labour market continues to run red hot New Zealand’s labour market remained extremely tight last quarter, presenting upside risks to our forecast for a 25bp rate hike later this month. The 0.8% q/q rise in employment was stronger than most had …
Tight labour market raises the risk of outsized RBNZ hike The strength of New Zealand’s labour market last quarter poses upside risks to our view that the RBNZ will lift rates by 25bp later this month. The 0.8% q/q rise in employment in Q1 was stronger …
2nd May 2023
The Reserve Bank of Australia retained its tightening bias when it lifted the cash rate by 25bp at today’s meeting, but we suspect that it won’t raise interest rates any further over the coming months . The Bank’s decision to lift the cash rate from 3.60% …
Tightening cycle over but rates will only be lowered in Q2 2024 The Reserve Bank of Australia retained its tightening bias when it lifted the cash rate by 25bp at today’s meeting, but we suspect that it won’t raise interest rates any further over the …
House price rebound will prove fleeting The ongoing rebound in house prices is living on borrowed time. With affordability extremely stretched and the economy poised for a sharp downturn, we’re sticking to our forecast that house prices will fall another …
RBNZ to relax lending rules On Wednesday, the RBNZ unveiled its proposal to ease Loan-to-Value Ratio (LVR) restrictions on mortgage lending by banks. With house prices now 18% below their January 2022 peak, the RBNZ has judged that threats to financial …
28th April 2023
Inflation moderating, but still far too strong to be consistent with RBA’s target Further tightening needed to return inflation to target by mid-2025 Rate cuts will start a bit later than most expect; our forecast is Q2 2024 Note: We’ll be discussing the …
26th April 2023
RBA will deliver a final 25bp rate hike next week While inflation is moderating slightly faster than the RBA had anticipated, price gains remain far too strong to be consistent with the Bank’s 2-3% inflation target and we’re sticking to our forecast of a …
Inflation will only return to target in H2 2024 While inflation is moderating slightly faster than the RBA had anticipated, price gains remain far too strong to be consistent with the Bank’s 2-3% inflation and we’re sticking to our forecast of a final …
New Zealand’s housing downturn not over yet According to data released by REINZ earlier this week, the median house price in New Zealand fell by 2.2% in seasonally-adjusted m/m terms in March. With house prices already down by 18% from their January 2022 …
21st April 2023
The recommendations by the RBA’s review panel unveiled today were broadly in line with what we had anticipated. While the 2-3% inflation target will be retained, sweeping changes to the Bank’s leadership structure are underway. And with a lot of the …
20th April 2023
Inflation is coming off the boil Although inflation in Q1 was below what the RBNZ had expected, we don’t expect the Bank to take its foot off the brakes just yet. Indeed, with non-tradables prices continuing to rise at a rapid clip, the RBNZ is likely to …
Price pressures show signs of easing Amid ongoing concerns that non-tradables inflation will settle at an uncomfortably high level, we still expect the RBNZ to push ahead with one final 25bp rate hike in May. The 1.2% rise in consumer prices last quarter …
19th April 2023
Note: We discussed our revamped FCIs and took your questions on global financial conditions in a 20-minute online briefing on Thursday, 20 th April . Watch the recording here . We have revamped our financial conditions indices (FCIs) for advanced …
18th April 2023
Inflation concerns will prompt a final 25bp rate hike in May The minutes of the RBA’s April meeting reinforce our view that the decision to leave rates on hold did not signal an end to the Bank’s tightening cycle. Indeed, the Board did discuss the case …
Central banks in Australia and New Zealand have taken starkly different approaches to managing the inflation-unemployment trade-off in their countries. Despite being behind the curve on interest-rate hikes relative to other advanced economy central …
17th April 2023
On April 13 th a three-member panel delivered its review of Australia’s migration system to the Home Affairs minister, Claire O’Neil. Although the review is unlikely to be published before next month, it is already stoking debate over whether the ongoing …
14th April 2023
Resilient labour market will prompt RBA to hike rates further in May The strength in March’s labour market data will probably prompt the Reserve Bank of Australia to deliver a final 25bp rate hike next month, but unemployment will rise before long . The …
13th April 2023
The strength in March’s labour market data will probably prompt the Reserve Bank of Australia to deliver a final 25bp rate hike next month, but unemployment will rise before long. The 53,000 rise in employment last month was much stronger than most had …
House prices rebounded in March but we aren’t convinced that this marks the beginning of a sustained rebound. Affordability is set to become the most stretched since the early 90s and if the unemployment rate rises as rapidly as we anticipate, house …
11th April 2023
The RBA’s decision to keep rates on hold at its April meeting has reignited debate over whether the Bank’s tightening cycle is at an end. Financial markets certainly seem to think this is the case. However, our view, and the analyst consensus, is that the …
6th April 2023
Falling international trade points to weaker growth The widening of the trade surplus in February largely reflects the fact that imports of goods and services fell at a much faster rate than exports. Therefore, even though net trade will make a positive …
Falling international trade points to weaker growth The widening of the trade surplus in February highlights ongoing weakness in domestic demand. The rise in the trade surplus to $13.9bn in February, from a downwards-revised $11.3bn in January, was in …
The decision by the Reserve Bank of New Zealand to lift its official cash rate by 50bp, to 5.25%, came as an upside surprise, but we still think the end of the hiking cycle is approaching. In any case, the Bank’s aggressive tightening confirms our view …
5th April 2023
Hawkish RBNZ will push New Zealand into recession The RBNZ’s decision to lift its official cash rate by 50bp, to 5.25%, came as an upside surprise to all. 22 out of 24 analysts polled by Reuters, including ourselves, had predicted a 25bp rate hike. The …
The Reserve Bank of Australia kept open the possibility of further tightening when it decided to leave its cash rate unchanged at 3.60% today. As such, we do still expect the RBA to deliver one final 25bp rate hike in May before bringing its tightening …
4th April 2023
RBA will deliver one final rate hike in May The RBA’s decision to keep rates on hold does not signal an end to its tightening cycle. The RBA’s decision to pause was correctly predicted by 21 out of 37 analysts polled by Reuters, including ourselves. The …
Housing downturn has further to run With housing affordability the most stretched it’s been since the global financial crisis, we don’t think the uptick in house prices in March will be sustained. We’re sticking to our forecast that house prices will fall …
3rd April 2023
Wage-price spiral still looking unlikely Ahead of today’s deadline for initial submissions to the 2022-23 Annual Wage Review, stakeholders have been haggling over increases to the minimum wage this year. The Australian Council of Trade Unions has backed a …
31st March 2023
The RBNZ will temper rate rises, but continue hiking to 5.25%. The Bank will look past the disruption to activity driven by Cyclone Gabrielle. Even so, recession-induced disinflation will pave the way for rate cuts by year-end. With the latest economic …
29th March 2023
