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Border reopening won’t ease labour shortages much

Australia’s government isn’t keen on opening the immigration floodgates once the border reopens to migrants next year and we still expect the unemployment rate to fall to 4% by 2023. Nor do we expect migration to ease labour shortages in New Zealand much next year. Nonetheless, New Zealand’s labour market is already very tight and with the RBNZ set to keep tightening monetary policy, we expect unemployment to creep higher over the next couple of years.
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 Data Response

Australia - Retail Sales (Oct. 2021)

The 4.9% m/m jump in retail sales in October brought them very close to their May peak and supports our view that consumption will reverse nearly all of the plunge during the lockdown this quarter.

26 November 2021

Australia & New Zealand Data Response

Australia Private Capex Survey (Q3 21)

Private capital expenditure dropped during the recent lockdowns but firms’ forecasts point to a strong rebound over the coming quarters.

25 November 2021

Japan Data Response

Japan Flash PMIs (Nov. 2021)

November’s flash PMI points to a rebound in industrial output amidst early signs that supply shortages are diminishing. But while the services sector is now on the mend, the recovery there is lacking vigour.

24 November 2021
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