Australia & New Zealand
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Australia & New Zealand

Australia & New Zealand Economics Update

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

Australia & New Zealand Economics Update

Australia - Rate hikes will result in housing downturn

High household debt will magnify the impact of interest rate hikes on the housing market and we now expect prices across the eight capital cities to fall by 5% from H2 2023. The upshot is that the RBA is unlikely to hike rates as sharply as the financial markets anticipate and may end up easing policy in 2024.

24 November 2021

Australia & New Zealand Economics Update

RBA recapitalisation would lift public debt

Rising interest rates will result in the RBA making further losses in the years ahead. The Bank’s existing reserves should be enough to absorb those losses in a benign scenario, but the Bank will stop paying a dividend. And in a worst-case scenario, the Treasury may inject capital of as much as 5% of GDP.

9 November 2021
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Australia & New Zealand Economics Update

Australia- The impact of rate hikes on household finances

If the RBA hiked rates by nearly 200bp as the financial markets were anticipating until recently, households’ debt servicing burden would hit an all-time high and housing would become the least affordable since the global financial crisis. That would slow the recovery in consumption and could prove a formidable headwind to the housing market. The upshot is that the Bank will tread more cautiously.

Australia & New Zealand Economics Update

Patient RBA set to hike rates only gradually

The RBA abandoned its yield target and its pledge that rates will remain low until 2024 today, but still sounded dovish. While the financial markets expect the first rate hike in May next year, we expect the Bank to wait until early-2023.

Australia & New Zealand Economics Update

Structural slowdown in China a key threat to Australia

Australia’s exports to China are even more vulnerable to a slowdown in the property sector than they were before the trade spat as iron ore has gained in importance. We think that China’s steel demand will fall before long and even if it doesn’t, a shift to electric arc furnaces is a big threat to Australian miners.

Australia & New Zealand Economics Update

RBNZ to continue hiking rates as restrictions ease

The RBNZ’s decision to begin its hiking cycle while Auckland is still in lockdown highlights that the New Zealand economy is on the brink of overheating. And as restrictions ease, we think the Bank will continue hiking rates in the months ahead.

Australia & New Zealand Economics Update

Australia- Sustained high inflation will prompt rate hikes in 2023

The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already.

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