Australia’s housing downturn will probably come to an end towards the end of the year. That means that the drag from falling housing wealth on consumer spending will subside. It also means that homebuilding will become more attractive again. Even so, we expect the labour market to slacken further which will keep a lid on inflation. And with global headwinds intensifying, we think that both the RBA and the RBNZ will keep cutting interest rates. We therefore expect both exchange rates to weaken to US$0.65 by year-end.
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