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New Zealand - Wage growth will rise further before it falls

The 6% rise in the minimum wage will help lift wage growth further this year. But a loosening labour market and smaller minimum wage hikes in the years ahead will facilitate a slow down in wage growth from next year. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.
Ben Udy Australia and 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 Ben Udy

Australia & New Zealand Economics Weekly

Rates will rise faster than most expect

The RBA started its hiking cycle at its meeting this week. While the Governor indicated that the Bank was likely to stick to 25bp hikes in the near term, we think the Bank will hike by a larger 40bp in August after another upside surprise in the Q2 CPI data. Along with 25 bp hikes at every other meeting this year that would take rates to 2.25% by the end of this year. And we now think rates will peak at 2.75% next year, much higher than the consensus expects. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

6 May 2022

Australia & New Zealand Data Response

Australia International Trade (Mar. 2022)

The rise in the trade balance in March won’t be enough to prevent trade from being a significant drag on growth in Q1. In the months ahead higher export prices due to the war in Ukraine should lift the trade surplus even higher.

5 May 2022

Australia & New Zealand Data Response

New Zealand Labour Market (Q1 2022)

The continued tightness in the New Zealand labour market despite the omicron outbreak provides further evidence that the economy is still running hot. That’s why we expect the RBNZ to hike rates by 50 basis points in May.

4 May 2022
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