Australia & New Zealand

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.
Ben Udy Australia and New Zealand Economist
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Australia & New Zealand Economics Weekly

Border reopening won’t ease labour shortages much

Australia’s government isn’t keen on opening the immigration floodgates once the border reopens to migrants next year and we still expect the unemployment rate to fall to 4% by 2023. Nor do we expect migration to ease labour shortages in New Zealand much next year. Nonetheless, New Zealand’s labour market is already very tight and with the RBNZ set to keep tightening monetary policy, we expect unemployment to creep higher over the next couple of years.

26 November 2021

Australia & New Zealand Data Response

Australia - Retail Sales (Oct. 2021)

The 4.9% m/m jump in retail sales in October brought them very close to their May peak and supports our view that consumption will reverse nearly all of the plunge during the lockdown this quarter.

26 November 2021

Australia & New Zealand Data Response

Australia Private Capex Survey (Q3 21)

Private capital expenditure dropped during the recent lockdowns but firms’ forecasts point to a strong rebound over the coming quarters.

25 November 2021

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Australia & New Zealand Data Response

Australia International Trade (Aug. 2021)

The record trade surplus in August came despite the plunge in iron ore prices in August. The upshot is that net trade should provide a boost to GDP growth in Q3 as domestic demand weakens.

5 October 2021

Australia & New Zealand Data Response

Australia CoreLogic House Prices (Sep.)

House prices have continued to surge despite the recent lockdowns. But we expect house price growth to slow next year as affordability constraints bite and macroprudential limits are imposed.

1 October 2021

Australia & New Zealand Chart Book

Early signs of second-round effects from soaring prices

The RBA expects headline inflation to drop back from 3.8% in Q2 to 1.5% by mid-2022. By contrast, we now only expect it to fall to 2.5% over this period, reflecting the pass-through from soaring coal, gas and food prices. We also expect the recent weakening of the Australian dollar and the surge in shipping costs to lift “core” goods inflation. The Bank may be able to ignore even a lengthy period of above-target inflation as long as wage growth remains subdued. Unfortunately, there are early signs that the surge in consumer prices will have second-round effects. Union officials’ inflation expectations have surged and if our inflation forecasts are correct, they are unlikely to fall back much. A push by union officials to offset rising living costs coupled with severe labour shortages provide fertile ground for wage hikes in upcoming enterprise bargaining agreements. Surging consumer prices also point to a stronger minimum wage hike next year. That matters because collective agreements and the minimum wage together determine the wages of around 60% of Australian workers. All told, we expect wage growth to reach 3% by the end of next year, stronger than the RBA’s forecast of 2.5%.

30 September 2021
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