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Australia Wage Price Index (Q1)

The unchanged pace of quarterly wage growth in Q1 should ensure the RBA won’t accelerate its hiking cycle just yet. But with the labour market still tightening and inflation still rising, we think wage growth will increase further in the quarters ahead. ANZ Drop-in (18th May, 07:00 BST/14:00 SGT): Join economists from our Australia and Markets services shortly after the release of Q1 labour market data for a discussion about the Australian growth, inflation and monetary policy outlook. Register now.
Ben Udy Australia and New Zealand Economist
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Australia & New Zealand Economics Weekly

Housing downturn to weigh on activity

The housing downturn is now in full swing. While that hasn’t prevented a solid rise in consumption in Q2, we think falling wealth will be a drag on consumer spending next year. What’s more, our forecast that house prices will eventually fall 15% from their April peak would be consistent with dwelling investment falling sharply in the coming years. The upshot is that the housing downturn will bring the Australian economy close to recession next year.

1 July 2022

Australia & New Zealand Data Response

Australia CoreLogic House Prices (Jun.)

The monthly decline in house prices in June was the largest since 2019 but is unlikely to be the sharpest decline in the current downturn. We think house prices will eventually fall by 15% from their April peak, which will weigh heavily on GDP growth next year.

1 July 2022

Australia & New Zealand Data Response

Australia Retail Sales (May 2022)

The strong rise in retail sales in May highlights the strength in the Australian economy and is consistent with our view that the RBA will continue to hike rates aggressively in the months ahead.

29 June 2022

More from Ben Udy

Australia & New Zealand Chart Book

Consumption to surge even as real incomes fall

We now expect Australia’s inflation to rise by more than 6% this year. Even allowing for an acceleration in earnings growth and a further solid rise in employment as immigration resumes, that will result in the first annual fall in real household disposable income since the early 1990s. By contrast, we expect gains in nominal disposable income to continue to stay ahead of increases in consumer prices in New Zealand. Even so, we expect Australia’s real consumption growth to outpace New Zealand’s this year, for two key reasons. First, consumer spending in Australia has only just started to surpass its pre-virus peak but is already well above that watermark in New Zealand. Accordingly, there’s more scope for catch-up in Australia. Second, consumer confidence in Australia has softened but has collapsed in New Zealand, where it reached an all-time low in March. We’ve pencilled in a 6% rise in Australia’s consumption this year, well above our forecast of a 2.8% rise in New Zealand. ANZ Drop-in (18th May, 07:00 BST/14:00 SGT): Join economists from our Australia and Markets services shortly after the release of Q1 labour market data for a discussion about the Australian growth, inflation and monetary policy outlook. Register now.

17 May 2022

Australia & New Zealand Economics Update

New Zealand - Wage growth will rise further before it falls

The 6% rise in the minimum wage will help lift wage growth further this year. But a loosening labour market and smaller minimum wage hikes in the years ahead will facilitate a slow down in wage growth from next year. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

11 May 2022

Australia & New Zealand Economics Weekly

Rates will rise faster than most expect

The RBA started its hiking cycle at its meeting this week. While the Governor indicated that the Bank was likely to stick to 25bp hikes in the near term, we think the Bank will hike by a larger 40bp in August after another upside surprise in the Q2 CPI data. Along with 25 bp hikes at every other meeting this year that would take rates to 2.25% by the end of this year. And we now think rates will peak at 2.75% next year, much higher than the consensus expects. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

6 May 2022
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