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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% …
2nd May 2023
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 …
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
RBA has signalled that it will consider pausing its tightening cycle next week On balance, the economic data are consistent with a pause Final 25bp rate hike in May to be followed by cuts in Q2 2024 The RBA has signalled a pause in its tightening cycle at …
Sharp slowdown in inflation will prompt RBA pause next week The further sharp fall in inflation coupled with the softness of consumption will probably prompt the Reserve Bank of Australia to pause its tightening cycle next week, though we still expect one …
Softness in retail sales raises risk of RBA pause The tepid rise in retail sales in February all but locks in a contraction in sales volumes in Q1. We think that a stronger rise in services spending will help keep private consumption buoyant this quarter. …
28th March 2023
Softness in retail sales raises risk of RBA pause The tepid rise in retail sales in February all but locks in a contraction in sales volumes in Q1 and adds to the case for the RBA pausing its rate hiking cycle next week. The 0.2% m/m rise in retail sales …
The surge in credit card spending over the past year hasn’t been any larger than the increase in overall consumer spending. And with personal credit accounting for a small share of overall credit, a surge in business loan defaults would pose a far greater …
27th March 2023
The dovish tone of the RBA's March minutes has heightened the risks to our forecast for two more 25bp rate hikes in April and May. However, the Board did reiterate that its decision regarding a pause would hinge on the economic data released before its …
24th March 2023
RBA not done hiking yet The minutes of the RBA’s latest meeting confirm that the RBA is close to ending its tightening cycle, but we suspect that the strength of the latest labour force data will prompt it to deliver two more 25bp rate hikes. Contrary to …
21st March 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
Click here to read the full report Overview – Both the RBA and the RBNZ have more work to do to rein in the recent surge in inflation. That aggressive monetary tightening is starting to take its toll on economic activity and we expect GDP growth to slow …
Amid growing concerns about the global economic backdrop , financial markets not only believe that the RBA is done tightening, but that rate cuts are on the horizon. (See Chart 1.) However, we’re not convinced. The latest data don’t yet show domestic …
17th March 2023
Red-hot labour market will prompt further RBA tightening February’s strong labour force figures will prompt the Reserve Bank of Australia to press ahead with another 25bp hike at its April meeting despite mounting signs of strain in the global banking …
16th March 2023
Economy is tipping into recession With the New Zealand economy in for more pain on the heels of the Q4 GDP decline, we expect the RBNZ to start cutting rates towards the end of the year. The -0.6% q/q drop in production GDP was weaker than most had …
15th March 2023
RBNZ will cut rates by year-end as recession takes hold The -0.6% q/q contraction in production GDP was weaker than most had expected, but a tad stronger than our forecast (Refinitiv Consensus: -0.2%; CE: -1.5%). And crucially, it was much weaker than the …
The fracturing of strategic supply chains into US and China trade blocs threatens Australia’s existing significant trade with China but also presents Australia with an opportunity to align its trade relationships with its existing security …
Australian banks are unlikely to experience the same valuation losses that resulted in the demise of Silicon Valley Bank. The biggest risk is that a freezing up of overseas bond markets shuts down funding avenues for the major banks, but the Reserve Bank …
14th March 2023
Governor Phil Lowe’s proclamation at Wednesday’s AFR business summit that the RBA was closer to a pause in interest-rate increases has fed speculation of a dovish pivot on the part of the Board. Indeed, financial markets have tamped down their …
10th March 2023
The Reserve Bank of Australia signalled that further tightening will be needed when it hiked the cash rate to 3.60% today and we’re sticking to our forecast that the Bank will lift the cash rate to 4.10% by May . The RBA’s decision to lift the cash rate …
7th March 2023
RBA will hike the cash rate to 4.10% The RBA signalled that further tightening will be needed when it hiked the cash rate to 3.6% today and we’re sticking to our forecast that the Bank will lift the cash rate to 4.10% by May. The RBA’s decision to lift …
Net exports should support GDP growth in Q1 Although the rise in export earnings lagged growth in the import bill in January, we still think net trade will provide a decent boost to GDP growth this quarter. The decline in the trade surplus in January, …
Net exports will support GDP growth in Q1 Notwithstanding a fall in the trade surplus in January, we think net trade is likely to provide a boost to GDP growth in Q1. The decline in the trade surplus, from $13bn to $11.7bn in January came in below the …
