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RBNZ may delay hiking until May

The recent reimposition of the strictest level of lockdown in New Zealand was enough to prevent the RBNZ from hiking rates in August. And our assumption that restrictions will now remain in place until near the end of this year means we now expect the RBNZ to delay the start of its hiking cycle until May.
Ben Udy Australia and New Zealand Economist
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Australia & New Zealand Economics Weekly

Housing downturn to weigh on activity

The housing downturn is now in full swing. While that hasn’t prevented a solid rise in consumption in Q2, we think falling wealth will be a drag on consumer spending next year. What’s more, our forecast that house prices will eventually fall 15% from their April peak would be consistent with dwelling investment falling sharply in the coming years. The upshot is that the housing downturn will bring the Australian economy close to recession next year.

1 July 2022

Australia & New Zealand Data Response

Australia CoreLogic House Prices (Jun.)

The monthly decline in house prices in June was the largest since 2019 but is unlikely to be the sharpest decline in the current downturn. We think house prices will eventually fall by 15% from their April peak, which will weigh heavily on GDP growth next year.

1 July 2022

Australia & New Zealand Data Response

Australia Retail Sales (May 2022)

The strong rise in retail sales in May highlights the strength in the Australian economy and is consistent with our view that the RBA will continue to hike rates aggressively in the months ahead.

29 June 2022

More from Ben Udy

Australia & New Zealand Economics Weekly

RBNZ to delay tightening until next year

A fresh lockdown upended the Reserve Bank of New Zealand’s plan to raise interest rates this week. Given that the latest virus outbreak is driven by the highly contagious Delta variant, we suspect that new cases won’t fall back to zero quickly, forcing at least some restrictions to remain in place until a much larger share than the current 19% of the population are fully vaccinated. As such, we’ve pushed back our forecast for the first RBNZ rate hike to May next year. By contrast, we suspect that the resilience of Australia’s labour market will convince the Reserve Bank of Australia to press ahead with the tapering of its bond purchases next month.

20 August 2021

Australia & New Zealand Data Response

Australia Labour Market (Jul.)

The further decline in the unemployment rate in July may not last long, but it should be more than enough to convince the RBA to proceed with its plans to taper asset purchases in September.

19 August 2021

Australia & New Zealand Economics Update

RBNZ ready to lift rates when restrictions ease

The RBNZ sounded hawkish when it left rates on hold today, but the decision demonstrates that the Bank is taking a cautious approach in light of the current lockdown. Assuming restrictions can be eased before long we still expect the Bank to hike rates to 1.0% by the end of the year.

18 August 2021
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