Soaring interest rates and falling real incomes will result in a more pronounced slowdown in economic activity in both countries than most anticipate. In fact, we now expect New Zealand to enter a recession next year as the RBNZ will hike rates all the way to 4.5% in response to pervasive inflationary pressures. By contrast, we think that Australia will narrowly avoid a recession as the RBA should get on top of inflation before long. With unemployment rates set to surge and supply shortages diminishing, we expect inflation to fall more sharply than central banks are anticipating, paving the way for renewed policy easing from the end of next year.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services