The Antipodean central banks will tread different paths when it comes to policy setting in the near term. With the New Zealand economy in a tailspin and inflation well on its way to target, the RBNZ kicked off its easing cycle this month. Although the Bank has suggested it isn’t in a rush to loosen policy, we still think it will cut rates more rapidly than the analyst consensus is predicting. By contrast, the RBA is unlikely to loosen policy before May 2025, making it the last advanced economy central bank to do so. And with the output gap shrinking only gradually, the scope for rate cuts will be modest. Accommodative fiscal policy will support a gradual recovery in both economies over the coming quarters. Even so, we think growth will remain below-trend over the next couple of years.
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