Skip to main content

Low underlying inflation to prompt more rate cuts

We continue to believe that GDP growth in both Australia and New Zealand won’t accelerate at all this year from last year’s disappointing rates of around 2.3%. A further weakening in the outlook for underlying inflation will also play a major role in prompting the RBA and the RBNZ to cut interest rates by more than widely expected. The latest plunge in petrol prices will keep inflation in both economies below each central bank’s target range throughout this year. The weak economic backdrop will lead to underlying inflation falling below the target ranges too. Cuts in interest rates, from 2.0% to 1.5% in Australia and from 2.5% to 2.0% in New Zealand, will prompt the currencies of both countries to weaken to new seven-year lows.

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


Get access