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Renewed outbreaks will slow recovery in activity

A fresh outbreak in Victoria has brought weekly cases close to their previous peak. That resulted in many Victorians being placed back into lockdown and caused panic buying of essentials to restart. We still expect overall activity in Australia to continue to improve as restrictions are generally eased. But new outbreaks will slow the pace of recovery and reduce the likelihood of a boost to GDP from a restart of domestic tourism.
Ben Udy Australia and New Zealand Economist
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Australia & New Zealand Data Response

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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

RBA Watch

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The Reserve Bank of Australia will probably lift the cash rate by another 50bp in July and August before reverting to smaller 25bp hikes. However, the risks are tilted towards a prolonged period of aggressive tightening and rates may well peak above our current forecast of 3%.

28 June 2022

Australia & New Zealand Economics Weekly

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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

More from Ben Udy

Australia & New Zealand Economics Update

Hawkish RBNZ will hike even earlier

The RBNZ’s hawkish rate outlook has prompted us to bring forward our forecast for the first RBNZ rate hike from November to May next year. But in contrast to the RBNZ, we don’t think the pandemic will cause lasting damage to the labour market so we’ve pencilled in fewer rate hikes than the Bank.

14 June 2021

Australia & New Zealand Economics Weekly

Lockdowns and bond yields ease

The end of the lockdown in Victoria is an upside risk to our forecast that consumption will be unchanged in Australia in Q2. Meanwhile, S&P upgraded Australia’s credit rating outlook but that has little implication for Australian bond yields. We expect yields to rise to 2% by the end of the year as the RBA starts to taper its weekly bond purchases in November.

11 June 2021

Australia & New Zealand Data Response

International Trade & Retail Sales (Apr.)

The trade surplus widened again in April but that was largely driven by higher commodity prices. Export volumes will need to recover further in the months ahead to prevent trade from being a drag on GDP growth yet again in Q2.

3 June 2021
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