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Australia- Sustained high inflation will prompt rate hikes in 2023

The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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More from Australia & New Zealand

Australia & New Zealand Economics Weekly

Minimum wage to rise by 4% this year

Suggestions by Labor leader Albanese that minimum wage increases in line with inflation plus productivity growth are sustainable are wide of the mark at a time when consumer prices are rising twice as fast as the RBA would like them to. But with even employers supporting a large minimum wage hike, we now expect the Fair Work Commission to lift the minimum wage by 4% next month. While that would reduce the hit to household incomes from soaring living costs, it would add to the upward pressure on inflation. ANZ Drop-in (19th May, 07:00 BST/14:00 SGT): Join economists from our Australia and Markets services shortly after the release of Q1 labour market data on 18th May for a discussion about the Australian growth, inflation and monetary policy outlook. Register now.

13 May 2022

Australia & New Zealand Economics Update

New Zealand - Wage growth will rise further before it falls

The 6% rise in the minimum wage will help lift wage growth further this year. But a loosening labour market and smaller minimum wage hikes in the years ahead will facilitate a slow down in wage growth from next year. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

11 May 2022

Australia & New Zealand Economics Update

Australia - Falling real incomes won’t derail consumption for now

The sharpest fall in real incomes since the 1990/91 recession won’t prevent a strong rebound in consumption this year and next. But with the tailwind from reopening the economy set to fade, consumption and GDP growth will fall below trend in 2024, prompting the RBA to cut interest rates. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

9 May 2022

More from Marcel Thieliant

Australia & New Zealand Economics Weekly

Soaring food and energy prices to keep inflation high

The spike in rural commodity prices should spill over into higher food inflation before long. And while the impact of higher energy commodity prices is less clear cut, we think electricity inflation is also set to rise. That’s why we think headline inflation is set to ease less sharply than the RBA anticipates next year. Amid early signs that soaring consumer prices will result in stronger wage growth, we expect the RBA to hike rates in early 2023.

1 October 2021

Japan Economics Weekly

Supply shortages set to hold back manufacturers

Production of motor vehicles and electronics fell sharply in August and is well below pre-pandemic levels. This isn’t mainly due to weaker demand, which has moderated but remains healthy. Instead, it seems to be driven by mounting material shortages. Those shortages will probably persist for a while yet, posing a downside risk to our upbeat forecasts for 2022 GDP growth.

1 October 2021

Japan Data Response

Tankan (Q3 2021)

The latest Tankan survey was stronger than most had anticipated, supporting our view that the economy will recover rapidly as the Delta wave has ebbed. However, there are mounting signs that the recovery in the manufacturing sector will be hampered by supply shortages.

1 October 2021
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