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RBA’s dovish stance set to be challenged

While the RBNZ this week hiked interest rates by 25bp and signalled that more is to come, the RBA remained dovish. That makes sense in light of the continued weakness in underlying inflation and wage growth, but we still think that soaring commodity prices will eventually prompt Australia’s union to demand higher wages amidst a tight labour market. The looming strike by the Transport Workers Union is a sign of things to come.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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More from Australia & New Zealand

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 Marcel Thieliant

Japan Economic Outlook

Conditions for strong recovery finally in place

With the Delta wave having ebbed and the majority of the population now fully vaccinated, we expect a strong rebound in domestic demand over the coming months. But the inflation concerns that hang over other major developed economies won’t materialise and the Bank of Japan will keep policy loose for the foreseeable future.

7 October 2021

Australia & New Zealand Economics Update

Australia- Sustained high inflation will prompt rate hikes in 2023

The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already.

5 October 2021

Australia & New Zealand Economics Weekly

Soaring food and energy prices to keep inflation high

The spike in rural commodity prices should spill over into higher food inflation before long. And while the impact of higher energy commodity prices is less clear cut, we think electricity inflation is also set to rise. That’s why we think headline inflation is set to ease less sharply than the RBA anticipates next year. Amid early signs that soaring consumer prices will result in stronger wage growth, we expect the RBA to hike rates in early 2023.

1 October 2021
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