The end of Australia’s housing boom and New Zealand’s migration boom mean that economic growth in both countries will probably fall short of expectations over the next couple of years. Australia may struggle to grow by much more than 2.5% a year while GDP growth in New Zealand will probably weaken from close to 3.0% last year to about 2.0% next year. The real risk is that rising mortgage rates and tightening credit conditions prompt house prices to fall faster in Australia and that low business confidence undermines investment and employment in New Zealand. Our forecasts that the RBA won’t raise interest rates until late 2019 and that the RBNZ won’t follow suit until mid-2020 are a bit more dovish than the forecasts of most analysts and the financial markets.
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