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Three key points about New Zealand’s labour market

While the unemployment rate is now back at its pre-virus low, a range of indicators suggest that there is still some slack in the labour market. We think the unemployment rate may eventually fall to 3.5%. However, mounting staff shortages will act as a brake on activity until the border reopens next year.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Australia & New Zealand Chart Book

Consumption to surge even as real incomes fall

We now expect Australia’s inflation to rise by more than 6% this year. Even allowing for an acceleration in earnings growth and a further solid rise in employment as immigration resumes, that will result in the first annual fall in real household disposable income since the early 1990s. By contrast, we expect gains in nominal disposable income to continue to stay ahead of increases in consumer prices in New Zealand. Even so, we expect Australia’s real consumption growth to outpace New Zealand’s this year, for two key reasons. First, consumer spending in Australia has only just started to surpass its pre-virus peak but is already well above that watermark in New Zealand. Accordingly, there’s more scope for catch-up in Australia. Second, consumer confidence in Australia has softened but has collapsed in New Zealand, where it reached an all-time low in March. We’ve pencilled in a 6% rise in Australia’s consumption this year, well above our forecast of a 2.8% rise in New Zealand. ANZ Drop-in (18th May, 07:00 BST/14:00 SGT): Join economists from our Australia and Markets services shortly after the release of Q1 labour market data for a discussion about the Australian growth, inflation and monetary policy outlook. Register now.

17 May 2022

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

More from Marcel Thieliant

Australia & New Zealand Economics Update

Hawkish RBA to hike rates in early-2023

The Reserve Bank of Australia delivered a hawkish surprise by not delaying the tapering of its bond purchases. And by predicting that it will hit its full employment mandate and make further progress towards its inflation target, it has opened the door for earlier rate hikes than its current guidance of 2024.    

3 August 2021

Japan Economics Update

What would a hard lockdown mean for Japan?

With the Delta variant lifting new infections to a record-high, calls for a “hard” lockdown are growing. If that happened, services activity would fall further but we doubt that the government would shut down industry. And with households and firms now better prepared to deal with virus restrictions, it seems likely that GDP wouldn’t revisit last year’s lows.  

2 August 2021

Australia & New Zealand Economics Weekly

Activity to rebound in fourth quarter

With the Sydney lockdown set to extend into the fourth quarter, we’ve lowered our Q3 GDP forecast further. However, we still think that the economy will bounce back in Q4 as vaccine hesitancy is collapsing and vaccine supply is set to pick up. As such, we’re sticking to our view that the RBA will hike interest rates in early-2023.

30 July 2021
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