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Central banks to tighten as bust turns to boom

Sydney’s lockdown will keep a lid on Australia’s recovery for now, but booming housing markets should support consumer spending and dwellings investment in both countries. We don’t expect labour shortages to ease much when the border opens, so wages growth may finally accelerate. That should prompt the RBNZ to start hiking rates next month and the RBA to follow in 2023.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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More from Australia & New Zealand

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

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

More from Marcel Thieliant

Australia & New Zealand Data Response

Australia Labour Market (Jun.)

The labour market continued to tighten in June and while the lockdown in New South Wales may result in some bumps over the next couple of months, we expect wage growth to accelerate soon.

15 July 2021

Australia & New Zealand Economics Update

New Zealand- End of asset purchases signals rates will rise soon

The RBNZ today sent a hawkish signal by announcing the end of its bond purchases. While we currently expect the Bank to start hiking rates in May next year, the risk is that it will happen earlier.

14 July 2021

Australia & New Zealand Economics Update

Higher vaccine supply will render lockdowns obsolete

With the virus outbreak in New South Wales going from bad to worse we’re pencilling in a marked slowdown in Q3 GDP growth. However, given that deliveries of the Pfizer vaccine have been brought forward and more people are now encouraged to take the AstraZeneca one, we still expect most adults to be vaccinated by year-end so lockdowns should become a thing of the past before long.

12 July 2021
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