Australia & New Zealand
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RBNZ set to tighten in October, RBA in early-2023

The strong rise in New Zealand’s GDP in Q2 nearly returned output to its pre-virus path despite the headwinds from low net migration and the slump in foreign tourism. So while GDP plunged in Q3, we still think the RBNZ will be comfortable raising rates in October. Meanwhile, the lockdowns in Australia will probably cause the unemployment rate to rise in the months ahead. But we doubt the rate will surge as high as the RBA expects. Our bullish view on the labour market underpins our non-consensus forecast that the RBA will lift rates in early 2023.
Ben Udy Australia and New Zealand Economist
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Australia & New Zealand Economics Weekly

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Despite the rise in virus cases in recent weeks, strong inflation in New Zealand increases the pressure on the RBNZ to tighten policy further. While we are sticking to our forecast of a 25bp hike in November, there is certainly a risk that the Bank decides to hike rates by 50bps. Meanwhile, in Australia, the RBA defended its yield target this week as markets continue to challenge the RBA’s view that rates will be on hold until 2024. We’re less hawkish than financial markets but we do think wage growth will pick up faster than the RBA expects. Indeed, we expect the Bank to start hiking rates in early 2023.

22 October 2021

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A renewed tightening of the labour market next year means that wage growth will accelerate further. That pick-up will be underpinned by a stronger minimum wage hike, the lifting of caps on public sector wage growth and more employees switching jobs. And if it is accompanied by faster underlying inflation, it should be enough to prompt the RBA to lift interest rates by early-2023.

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Australia & New Zealand Data Response

New Zealand- Consumer Prices (Q3)

While we think the surge in inflation will start to abate in the year ahead, the strength will surely be worrying the RBNZ, supporting the case for further rate hikes.

18 October 2021

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Australia & New Zealand Data Response

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The strength in activity in Q2 was partly driven by the travel bubble which burst in Q3 as New Zealand went into lockdown. While we expect domestic demand to recover toward the end of the year, services trade may not rebound as quickly.

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Australia & New Zealand Economics Weekly

Reopening imminent but won’t start with a bang

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9 September 2021
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