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RBA to stay the course

The health situation in Australia continues to deteriorate, but the acceleration in the vaccine rollout means that lockdowns probably won’t last much longer. The Bank doesn’t believe that stepping up its asset purchases will provide much help and we expect it to stick to its plan of tapering its asset purchases to $4bn at the upcoming meeting.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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More from Australia & New Zealand

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 GDP (Q2 2021)

The further rise in GDP in Q2 was broadly in line with the RBA’s expectations and we suspect the Bank will press ahead with tapering its asset purchases this month.

1 September 2021

Japan Data Response

Japan Retail Sales (Jul. 2021)

While retail sales recovered further in July, the high frequency data point to a renewed fall in August as the Delta wave intensified and we’ve pencilled in a 0.8% drop in private consumption in Q3.

30 August 2021

Japan Data Response

Japan Flash PMIs (Aug. 2021)

Today’s flash PMIs suggest that the worsening Delta outbreak may yet result in a fall in consumption this quarter. And with supply shortages intensifying, the manufacturing sector isn’t stepping into the breach.

23 August 2021
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