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Reopening moving closer as vaccine rollout speeds up

The easing of restrictions for vaccinated people in New South Wales announced today fell short of expectations but with the vaccine rollout accelerating, Australia’s lockdowns should end towards the end of October. Meanwhile, the RBNZ sounded hawkish this week and with restrictions set to ease across most of New Zealand next week, the Bank may not wait until next year before hiking rates.
Ben Udy Australia and New Zealand Economist
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RBNZ will hike rates to 4% but cut next year

The RBNZ lifted the overnight cash rate by 50bp to 3% today as everyone had anticipated and signaled that it will deliver another 50bp hike in October. We now expect the Bank to hike rates to a peak of 4% instead of our previous forecast of 3.5%, but we still expect rate cuts next year.

17 August 2022

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17 August 2022

Australia & New Zealand Economics Update

Higher migration not enough to cool labour market

An increase in the permanent migration programme will help to alleviate labour shortages. But the rapid tightening of the labour market in recent months has been driven by strong labour demand rather than a shortfall in supply. The upshot is that the RBA would still have to tighten policy further.

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Australia & New Zealand Data Response

Australia Retail Sales (Jul 2021)

The decline in retail sales in July highlights the impact that lockdowns are having on the Australian economy. And with lockdowns spreading and intensifying in August, sales will fall further before they rebound.

27 August 2021

Australia & New Zealand Chart Book

Delta not clipping the wings of RBNZ hawks yet

New Zealand has entered a draconian lockdown and new infections continue to rise. The lockdown prompted the RBNZ to refrain from hiking interest rates at its August meeting and financial markets were only pricing in a 50% chance of a rate hike in October at the start of this week. However, that probability jumped to 80% following hawkish comments by Deputy Governor Hawkesby on Tuesday.  He noted that the Bank had considered the case for a 50bp hike at its August meeting and that the outlook for monetary policy wasn’t closely linked to lockdowns. Indeed, the Bank’s August Statement acknowledged that while a renewed virus outbreak would pose the biggest downside risk to economic activity, the “economy is resilient to periods at higher alert levels if there is significant government support provided”. We still assume that the more contagious Delta variant will prove too difficult to control to allow a marked easing of restrictions over the coming weeks and expect the Bank to delay the first rate hike until next year. But if the measures succeed in reining in the outbreak before long, the RBNZ may still hike in October.    

26 August 2021

Australia & New Zealand Data Response

Australia Private Capex Survey (Q2)

We estimate that private investment rose by 1.5% q/q in Q2 and firms’ expectations of future capital expenditure suggest firms are still keen to invest when lockdowns ease.


26 August 2021
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