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New Zealand GDP (Q3 2021)

The fall in New Zealand’s output in Q3 will have partially unwound in Q4 as lockdowns were gradually eased. And the fact the fall in GDP was much smaller than the RBNZ’s forecast supports our view that the Bank will lift interest rates rapidly in the first half of next year.  
Ben Udy Australia and New Zealand Economist
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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

RBA Watch

RBA to keep hiking by 50bp for now

The Reserve Bank of Australia will probably lift the cash rate by another 50bp in July and August before reverting to smaller 25bp hikes. However, the risks are tilted towards a prolonged period of aggressive tightening and rates may well peak above our current forecast of 3%.

28 June 2022

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

More from Ben Udy

Australia & New Zealand Economics Weekly

RBA to end asset purchases in February

While the Omicron variant poses some downside risks, Australia’s labour market has all but recovered from the recent lockdowns and we think that the unemployment rate will fall faster than the Reserve Bank of Australia had anticipated. With underlying inflation set to surprise to the upside, too, we now expect the Bank to end its bond purchase program in February. However, we still think that the hurdle for rate hikes is higher as the Bank has signalled that wage growth will have to pick up in earnest.   – This will be the last Economics Weekly for 2021. The next Weekly will be sent on Friday 7th Jan. 2022 –

17 December 2021

Australia & New Zealand Chart Book

Diverging outlook for monetary policy

While the RBNZ has lifted interest rates by 50bp and signalled that as much as 200bp of tightening is still to come, the RBA’s central scenario remains that interest rates won’t be raised until 2024. While we have pencilled in the first RBA rate hike for early-2023, there are good reasons for the RBA to be more dovish. While New Zealand’s household savings rate was back at pre-virus levels just before the latest lockdown, it was still well above it in Australia. And while New Zealand has recently recorded a record trade deficit of 3% of GDP, Australia has recorded a record trade surplus of 5% of GDP. With New Zealand’s domestic demand overheating, it’s no surprise that most measures of core inflation are now at or above the top-end of the RBNZ’s inflation 1-3% target range, whereas underlying inflation in Australia has only recently climbed into the RBA’s 2-3% target range.

29 November 2021

Australia & New Zealand Economics Update

RBNZ will hike rates to 2.0% next year

While the RBNZ only hiked rates by 25bps at today’s meeting, it is set to continue lifting rates next year. However, we think a slowdown in the economy will end the Bank’s hiking cycle with the OCR at 2.0%.

24 November 2021
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