Australia & New Zealand
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Additional savings could provide fuel for the rebound

The 7.9% q/q recovery in consumption in Australia in Q3 still left it 6.8% below pre-virus levels. Even excluding Victoria, consumption only recovered to around 4.5% below pre-virus levels. And since the huge stimulus payments continued and labour income largely recovered, disposable income rose kept rising. Taken together, that meant that the household saving rate only fell from 22.1% in Q2 to 18.9% in Q3. In New Zealand, the saving rate dropped back to pre-virus rates in Q3 as consumption rebounded to be 0.6% above pre-virus levels. (see Chart 1.). Even so, the excess savings so far this year are worth around 2.8% of nominal consumption in New Zealand and 9.8% in Australia. We’ve assumed that that money will largely be used to pay down high debt levels. But if it is spent on household consumption next year it would pose an upside risk to our already above consensus forecasts that GDP will grow by 4.5% in Australia and by 6.0% in New Zealand in 2021.
Ben Udy Australia and New Zealand Economist
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Australia & New Zealand Data Response

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18 October 2021

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15 October 2021

Australia & New Zealand Economic Outlook

Rising inflationary pressures to prompt tightening

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14 October 2021

More from Ben Udy

RBNZ Watch

RBNZ tightening creeping closer

We doubt the RBNZ will adjust any policy settings when it meets next Wednesday 14th July. However, as the New Zealand economy continues to recover faster than the RBNZ expects we think the Bank will adopt an increasingly hawkish tone. We expect the Bank to announce an end to its asset purchases In August and to start hiking rates from May 2022.

7 July 2021

Australia & New Zealand Data Response

Australia: Retail Sales (May 2021)

Retail sales are sure to decline in June as the impact of the recent lockdowns weighs on household consumption. Even so, the rise in retail sales in May means the risks to our forecast the consumption was unchanged in Q2 are to the upside.

5 July 2021

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Labour shortages to persist

Job vacancies have continued to surge in Australia highlighting worsening staff shortages in almost every industry. While subdued labour mobility was an initial driver, we estimate that labour mobility is almost back at its pre-virus level. Instead, we still believe that the border closure is the biggest driver of these shortages. Given that we don’t expect the border to reopen until the middle of next year, the labour market is set to remain tight for a long time to come.

2 July 2021
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