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Economy may have kept growing in Q3

The modest fall in private investment and the continued surge in retail sales set a high bar for economic activity in Q3, when tough restrictions will have resulted in a slump in consumption and investment in Victoria. But with activity elsewhere rebounding, we still expect GDP to eke out a small gain.
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

RBNZ Watch

RBNZ tightening creeping closer

We doubt the RBNZ will adjust any policy settings when it meets next Wednesday 14th July. However, as the New Zealand economy continues to recover faster than the RBNZ expects we think the Bank will adopt an increasingly hawkish tone. We expect the Bank to announce an end to its asset purchases In August and to start hiking rates from May 2022.

7 July 2021

Australia & New Zealand Data Response

Australia: Retail Sales (May 2021)

Retail sales are sure to decline in June as the impact of the recent lockdowns weighs on household consumption. Even so, the rise in retail sales in May means the risks to our forecast the consumption was unchanged in Q2 are to the upside.

5 July 2021

Australia & New Zealand Economics Weekly

Labour shortages to persist

Job vacancies have continued to surge in Australia highlighting worsening staff shortages in almost every industry. While subdued labour mobility was an initial driver, we estimate that labour mobility is almost back at its pre-virus level. Instead, we still believe that the border closure is the biggest driver of these shortages. Given that we don’t expect the border to reopen until the middle of next year, the labour market is set to remain tight for a long time to come.

2 July 2021
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