Annual GDP growth in Australia has probably bottomed out already but we expect growth to remain below potential in 2020. As such, jobs growth will probably not be strong enough to absorb the expansion in the labour force and we expect Australia’s unemployment rate to rise to 5.5% in 2020. Likewise, we expect a renewed slowdown in growth to raise New Zealand’s unemployment rate from 4.2% in Q3 to 4.7% by the middle of next year. Rising unemployment will result in slower wage growth and weigh on inflation. The upshot is that both central banks have more work to do. The pick-up in growth in Q3 in New Zealand raises the risk that the RBNZ keeps rates on hold next year but on balance we still expect further easing. And we think the RBA will cut rates to 0.25% and launch QE in 2020.
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