The latest data suggest that Australia’s productivity will continue to languish in the near term. The resulting surge in unit labour cost growth will keep services inflation stubbornly high. Nonetheless, with the labour market cooling more quickly than it had anticipated, the RBA will be wary of tightening policy any further. Meanwhile, in New Zealand the government has decided to inject more fiscal stimulus into the economy than it had previously indicated. That all but ensures the RBNZ will lift rates by 25bp next week.
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