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RBNZ to press ahead with tightening

Economic activity in New Zealand took a significant hit as the country was plunged into its strictest level of lockdown in August. But New Zealand’s success at taming the virus means output should return to its pre-Delta path by Q1 and the RBNZ will begin hiking rates in October.
Ben Udy Australia and New Zealand Economist
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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

Australia & New Zealand Data Response

Australia Labour Market (May 2022)

The strong rise in employment in May will keep pressure on the RBA to continue its aggressive hiking cycle in the months ahead. 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  

16 June 2022

More from Ben Udy

Australia & New Zealand Economics Weekly

Hospitalisations could pose risk to reopening

New South Wales and Victoria look set to remain under heavy restrictions until the vaccinations thresholds can be met. But with cases and hospitalisations surging there is a risk that hospitals will begin to approach maximum capacity. That could force states to delay reopening to avoid overwhelming the healthcare system even once 70% of their population are fully vaccinated and poses some downside risks to our optimistic Q4 GDP forecast. Meanwhile, New Zealand is doing well in its latest outbreak with cases falling and vaccinations surging. On that basis, we now think the RBNZ will press ahead with hiking rates in October.

3 September 2021

Australia & New Zealand Data Response

Australia International Trade (Jul. 2021)

The record trade surplus in July was largely driven by stronger commodity prices which won’t last. But we expect weaker domestic demand to weigh on imports over the coming months which should see trade make a positive contribution to growth this quarter.

2 September 2021

Australia & New Zealand Data Response

Australia CoreLogic House Prices (Aug.)

The drag from the current lockdowns on the housing market won’t last, but we expect house price growth to slow in earnest next year as affordability constraints bite.

1 September 2021
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