My subscription
My Subscription All Publications

Inflation will keep the RBA under pressure

Business purchase costs in the October NAB survey rose to their strongest level since 2008, consistent with trimmed mean inflation of nearly 1.5% q/q. That probably overstates the strength in underlying inflation in the months ahead as other measure of inflation in the survey were more subdued. While we do expect strong price growth to keep pressure on the RBA to tighten monetary policy, our view that wage growth will only approach 3% by the end of next year underpins our view that the Bank will hike later and less aggressively than financial markets expect.  
Ben Udy Australia and New Zealand Economist
Continue reading

More from Australia & New Zealand

Australia & New Zealand Economics Update

What does a Labor government mean for Australia?

A Labor government will probably keep fiscal policy looser than the previous Coalition government, putting more pressure on the RBA to hike interest rates. But while a Labor government will make greater efforts to decarbonise the economy, the bulk of mining output is exported so this won’t have a big impact on the mining industry. And we doubt Labor will be able to end the trade war with China.

23 May 2022

Australia & New Zealand Economics Update

New Zealand - Budget boost will exacerbate inflationary pressures

While the government’s Budget was focused on equipping households to withstand surging living costs, by adding to demand we think it will cause inflation to be higher over the next year. That’s all the more reason for the RBNZ to continue hiking rates aggressively throughout this year.

20 May 2022

Australia & New Zealand Economics Weekly

Wage growth still set to approach 3% by year-end

While wage growth is set to reach 3% by the end of the year, this week’s labour market data didn’t contain any upside surprises that would convince the Reserve Bank of Australia to accelerate its hiking cycle at the upcoming meeting in June. Meanwhile, the opposition Labor party looks on track to win the federal election on Saturday. While Labor has only pledged slightly looser fiscal policy that would easily be offset by likely upward revisions to tax revenue, the party’s historical track record suggests that the budget deficit would shrink less rapidly than under the Coalition government over the coming years.

20 May 2022

More from Ben Udy

Australia & New Zealand Data Response

Australia Labour Market (Oct.)

The rise in the unemployment rate suggests that the labour market continued to suffer right up until the end of the recent lockdowns. But given the ending of lockdowns in mid-October we expect the unemployment rate to fall again in the months ahead.

11 November 2021

Australia & New Zealand Economics Weekly

RBNZ set to hike by 50bp, RBA remains the archdove

The exceptional strength of New Zealand’s mean that we now think the RBNZ will hike rates by 50bps in November and by a further 100bps next year, which would take the OCR to 2.0%. That’s above the analyst consensus but less hawkish than market pricing as we still think falling house prices and higher debt servicing costs will weigh on consumption and dwellings investment next year. In Australia, the RBA’s persistently dovish stance has taken some of the wind out of financial markets’ sails. But we still believe that wage growth will pick up sooner than the Bank anticipates. That’s why we are sticking to our view that the RBA will first hike rates in early 2023, a year sooner than the Bank expects.

5 November 2021

Australia & New Zealand Data Response

New Zealand- Labour Market (Q3 2021)

The decline in the unemployment rate to 3.4% should encourage the RBNZ to hike rates more aggressively than we had previously anticipated in the months ahead.

2 November 2021
↑ Back to top