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What do rising house prices mean for the economy?

The recent strong pace of house price gains is unlikely to last as income growth is set to remain subdued. We expect house prices to rise by around 5% next year and in 2021. A rebound in house prices is good news for vehicle and furniture sales, but construction activity will probably fall for a few more quarters. We reiterate our forecast that GDP growth will rebound from 1.7% this year to 2.0% in 2020.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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More from Australia & New Zealand

Australia & New Zealand Economics Update

RBNZ will hike rates to 4% but cut next year

The RBNZ lifted the overnight cash rate by 50bp to 3% today as everyone had anticipated and signaled that it will deliver another 50bp hike in October. We now expect the Bank to hike rates to a peak of 4% instead of our previous forecast of 3.5%, but we still expect rate cuts next year.

17 August 2022

Australia & New Zealand Data Response

Australia Wage Price Index (Q2)

Wage growth surpassed its pre-virus peak in Q2 and will jump above 3% this quarter due to a surge in the minimum wage and a tightening labour market. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.

17 August 2022

Australia & New Zealand Economics Update

Higher migration not enough to cool labour market

An increase in the permanent migration programme will help to alleviate labour shortages. But the rapid tightening of the labour market in recent months has been driven by strong labour demand rather than a shortfall in supply. The upshot is that the RBA would still have to tighten policy further.

16 August 2022

More from Marcel Thieliant

Australia & New Zealand Economics Update

RBA may make QE more flexible

We now expect the RBA to refrain from announcing a target for the overall amount of bond purchases at the July meeting while keeping the weekly pace of purchases unchanged at $5bn. A more flexible approach to bond-buying would make it easier for the Bank to end QE by mid-2022 as we anticipate.

8 June 2021

Australia & New Zealand Economics Weekly

Solid Q1 GDP more than makes up for Q2 weakness

The strong rise in GDP in Q1 has prompted us to revise up our GDP forecasts for this year. And while the Victoria lockdown will weigh on consumption growth in Q2, sentiment is holding up so we expect consumption to rebound in Q3 once the lockdown is lifted. Finally, soaring demand for housing is driving record capacity constraints in the construction industry. With the border likely to remain closed until the middle of next year, construction firms will find it difficult to alleviate the labour shortages they are facing.

4 June 2021

Japan Economics Weekly

Industry to benefit from recovery in capital spending

The slump in retail sales in April suggests that consumer spending may have fallen further during the third state of emergency. However, the medical situation is improving and the vaccination rollout is accelerating. And Japan’s traditional growth engine, its large manufacturing sector, is roaring back to life as industrial output is now above pre-virus levels. While GDP growth this year will fall short of expectations, we think it will be stronger than most anticipate in 2022.

4 June 2021
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