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Australia CoreLogic House Prices (Sep.)

House prices have continued to surge despite the recent lockdowns. But we expect house price growth to slow next year as affordability constraints bite and macroprudential limits are imposed.
Ben Udy Australia and New Zealand Economist
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More from Australia & New Zealand

Australia & New Zealand Economics Weekly

More 50bp hikes coming

We agree with RBA governor Phillip Lowe that market pricing for the Cash rate looks too aggressive. But we also think the consensus is still too dovish. After all, Governor Lowe is starting to grow concerned that wage growth will be too strong to allow the Bank to meet its target. And the RBA is still lagging behind a number of its peers in its hiking cycle. We therefore expect the RBA to hike rates to a peak of 3.1%, higher than the analyst consensus of a peak of 2.60%.

24 June 2022

Australia & New Zealand Economics Weekly

Inflationary pressures keep building

The big minimum wage hike announced by the fair work commission this week will lead to higher wage growth over the coming year. Given the tightness in the labour market and rising cost pressures, businesses will be forced to pass that rise onto consumers. That suggests the risks to our forecast that inflation will peak just above 7% in Q3, are tilted to the upside. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

17 June 2022

Australia & New Zealand Data Response

Australia Labour Market (May 2022)

The strong rise in employment in May will keep pressure on the RBA to continue its aggressive hiking cycle in the months ahead. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

16 June 2022

More from Ben Udy

Australia & New Zealand Chart Book

Early signs of second-round effects from soaring prices

The RBA expects headline inflation to drop back from 3.8% in Q2 to 1.5% by mid-2022. By contrast, we now only expect it to fall to 2.5% over this period, reflecting the pass-through from soaring coal, gas and food prices. We also expect the recent weakening of the Australian dollar and the surge in shipping costs to lift “core” goods inflation. The Bank may be able to ignore even a lengthy period of above-target inflation as long as wage growth remains subdued. Unfortunately, there are early signs that the surge in consumer prices will have second-round effects. Union officials’ inflation expectations have surged and if our inflation forecasts are correct, they are unlikely to fall back much. A push by union officials to offset rising living costs coupled with severe labour shortages provide fertile ground for wage hikes in upcoming enterprise bargaining agreements. Surging consumer prices also point to a stronger minimum wage hike next year. That matters because collective agreements and the minimum wage together determine the wages of around 60% of Australian workers. All told, we expect wage growth to reach 3% by the end of next year, stronger than the RBA’s forecast of 2.5%.

30 September 2021

RBNZ Watch

RBNZ finally set to hike rates

New Zealand has slowed the spread of the Delta variant and eased its lockdown, which stopped the RBNZ from hiking in August. And the RBNZ still seems keen to hike rates given the red-hot economy. We expect the RBNZ to launch a tightening cycle at its upcoming meeting on Wednesday 6th October with a 25bp rate hike. Our forecast is that rates will reach 1.50% by the middle of next year.

29 September 2021

Australia & New Zealand Economics Weekly

RBNZ set to tighten in October, RBA in early-2023

The strong rise in New Zealand’s GDP in Q2 nearly returned output to its pre-virus path despite the headwinds from low net migration and the slump in foreign tourism. So while GDP plunged in Q3, we still think the RBNZ will be comfortable raising rates in October. Meanwhile, the lockdowns in Australia will probably cause the unemployment rate to rise in the months ahead. But we doubt the rate will surge as high as the RBA expects. Our bullish view on the labour market underpins our non-consensus forecast that the RBA will lift rates in early 2023.

17 September 2021
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