Australia & New Zealand

Australia & New Zealand


Plans to double migration sound good in theory

The new NSW premier has received advice that Australia should double the pace of migration in the coming years to make up for lost population growth. That plan would help ease labour shortages, boost tax revenue and lift GDP growth. We already expect Australia to grow by more than the consensus anticipates next year, but if Australia is able to double the pace of migration growth, GDP would be even stronger than we expect.

15 October 2021

Rising inflationary pressures to prompt tightening

Domestic demand is set to rebound from recent lockdowns and labour markets should remain tight. Meanwhile, soaring energy and food prices will keep inflation high for a prolonged period. To be sure, the Reserve Bank of Australia won’t respond to high headline inflation until wage growth picks up in earnest. However, with severe staff shortages and limited immigration, the bargaining position of workers is strong and we expect Australia’s wage growth to reach 3% by the end of next year. We expect the RBNZ to hike rates to 1.5% next year and the RBA to start lifting rates in early-2023.

14 October 2021

Australia Labour Market (Sep.)

While employment plunged yet again in September, hours worked started to rebound and the end of lockdowns will result in a rapid recovery in the labour market over coming months.

14 October 2021
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Structural slowdown in China a key threat to Australia

Australia’s exports to China are even more vulnerable to a slowdown in the property sector than they were before the trade spat as iron ore has gained in importance. We think that China’s steel demand will fall before long and even if it doesn’t, a shift to electric arc furnaces is a big threat to Australian miners.

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.

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.

Australia International Trade (Aug. 2021)

The record trade surplus in August came despite the plunge in iron ore prices in August. The upshot is that net trade should provide a boost to GDP growth in Q3 as domestic demand weakens.

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.

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