Rating downgrades & pushback by the RBNZ

While the credit rating downgrade of Victoria and New South Wales is justified given the deterioration in their fiscal outlook, we suspect that the RBA will continue to keep a lid on states’ borrowing costs even when its quantitative easing programme ends in April. Meanwhile, the RBNZ has pushed back against the assertion that it should consider house prices when setting monetary policy. But we still think the Bank is done cutting rates.