New Zealand's labour market was in worse shape last quarter than most had anticipated. What's more, with the economy clearly struggling, labour market slack is likely to rise further. However, with cost pressures still elevated, firms' pricing intentions have broadly moved sideways in recent months. Accordingly, the RBNZ will be reticent to cut rates before Q4. Meanwhile, in Australia, there is a non-negligible risk that the RBA will leave rates on hold next week, in contrast to our view that it will hand down a 25bp hike. Even if that turns out to be the case, with inflation increasingly domestically-driven, the RBA is unlikely to loosen policy before early next year.
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