Australia & New Zealand
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Australia & New Zealand

Australia

Hawkish RBA to hike rates in early-2023

The Reserve Bank of Australia delivered a hawkish surprise by not delaying the tapering of its bond purchases. And by predicting that it will hit its full employment mandate and make further progress towards its inflation target, it has opened the door for earlier rate hikes than its current guidance of 2024.   China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.

3 August 2021

Australia CoreLogic House Prices (Jul.)

House prices are continuing to surge and forward indicators suggest the upswing has a little further to run. Even so we think house price growth will slow in 2022.

2 August 2021

Vaccination threshold may be hit in four months

With new virus cases hitting fresh highs this week, Sydney’s lockdown has been extended until end-August and looks set to last for months given the high transmissibility of the Delta variant. Melbourne also briefly re-entered lockdown this month, though restrictions have now been lifted. Other states may manage to keep Delta at bay, but with NSW accounting for one-third of nationwide output, we’re forecasting a 1% q/q decline in Q3 GDP. However, we expect growth to rebound in Q4. The government has now announced that the domestic economy will fully reopen when 70% of the eligible population are fully vaccinated. We estimate that may happen in about four months if daily vaccinations reach 0.8% of the population by the end of this quarter and stay there until year-end, from 0.6% over the past week.

30 July 2021
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Activity to rebound in fourth quarter

With the Sydney lockdown set to extend into the fourth quarter, we’ve lowered our Q3 GDP forecast further. However, we still think that the economy will bounce back in Q4 as vaccine hesitancy is collapsing and vaccine supply is set to pick up. As such, we’re sticking to our view that the RBA will hike interest rates in early-2023.

RBA to delay tapering to November

We expect the Reserve Bank of Australia to respond to the worsening virus outbreak in Sydney by delaying the tapering of its asset purchases from September to November. Even so, we still expect those purchases to end in mid-2022, with rate hikes to follow in early-2023.

Australia Consumer Prices (Q2 2021)

Most of the surge in inflation in Q2 was driven by base effects that will unwind over the next couple of quarters, but we think that inflation will remain stronger than the RBA is anticipating.

Australia- How inflationary is the border closure?

We believe that the slump in net migration is holding back supply more than demand. Unless the government allows net migration to overshoot its pre-virus level for a prolonged period once the border reopens next year, we think that staff shortages will prove more inflationary than the RBA anticipates.

RBA to push back taper

With New South Wales today declaring a “national emergency” in response to the worsening outbreak of the highly contagious Delta variant, we now expect the Reserve Bank of Australia to play its part by keeping bond purchases at $5bn per week until November.

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