Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The overnight strikes by Israel on Iran mark a major escalation in the conflict in the region and, with the oil market tighter than it was a few months ago, the risks to oil prices look more balanced than we’d previously thought (rather than skewed to the …
13th June 2025
While this year’s minimum wage hike will be only slightly smaller than last year’s, it is unlikely to prevent a further slowdown in wage growth over the coming quarters. That said, with capacity pressures still elevated, we continue to believe that the …
3rd June 2025
Australian house prices edged up a notch in May, and leading indicators suggest they will gather further momentum over the coming months. However, with debt-servicing costs set to remain onerous despite the RBA’s rate cuts, the cyclical upswing is likely …
2nd June 2025
In this Update, we answer several key questions about how the US Court of International Trade (CIT) tariff ruling might affect the US and other economies. The outlook may now rest on the decision of the Republican-stacked Supreme Court. The upside risks …
29th May 2025
As was widely expected, the RBNZ cut its Official Cash rate by 25bp, to 3.25%, today. The revelation that the decision to cut was not a unanimous one has been interpreted as a hawkish signal by financial markets. However, we would put more emphasis on the …
28th May 2025
With housing affordability still extremely stretched, we expect house price growth to remain muted even as mortgage rates are set to fall further. However, there’s more scope for dwellings prices to rise in the smaller capital cities, while apartment …
22nd May 2025
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
20th May 2025
The recent climbdown has left the effective US tariff rate on the rest of the world at around 15% as opposed to the 27% which was threatened at the height of this year’s trade war. While this is still the highest since the 1930s, it is unlikely to cause a …
13th May 2025
Global Trade Stress Monitor …
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs. This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and …
12th May 2025
Around half of the recent surge in gold exports reflects soaring prices. While the latter may encourage mining firms to expand output, it will probably take years for gold production to return to its 2019 peak. Accordingly, gold exports won’t fill the gap …
8th May 2025
Stretched housing affordability continues to keep a lid on house price growth. And if we’re right that the RBA will only lower rates by another 50bp, it will remain a headwind. But with the housing market no longer creating upside risks to inflation, …
1st May 2025
The upcoming federal election on 3 rd May appears likely to result in a hung parliament. Although the ruling Labor party’s recent uptick in the polls suggest that it is in pole position to form a minority government, we wouldn’t count out the …
16th April 2025
While the recent drop in crude oil prices would lower inflation a bit, that drag will be more than offset by a boost from the weaker Australian dollar. The upshot is that barring a sharp fall in business confidence, we’re sticking to our forecast that the …
14th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
10th April 2025
Australia and New Zealand are safe havens in the current global trade storm because they have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. We’re therefore sticking to our forecast that the RBA will only …
7th April 2025
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
We expect the Reserve Bank of New Zealand to cut its Official Cash Rate by 25bp, to 3.5%, at its next meeting on 9 th April. Although activity is now on the mend, spare capacity will ease only gradually, consistent with a sustained decline in …
2nd April 2025
While the RBA is becoming increasingly confident that inflation will sustainably return to target, we still expect its easing cycle to be shallower than most anticipate. The RBA’s decision to leave its policy rate unchanged at 4.10% was correctly …
1st April 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
27th March 2025
As expected, Australian Treasurer Jim Chalmers unveiled a slew of new spending measures in today’s pre-election Budget. However, we don’t believe the scope of fiscal expansion is large enough to keep the RBA from cutting rates a bit further this year. In …
25th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
The modest uptick in Australian house prices last month is unlikely to mark the beginning of a meaningful rally. With the Reserve Bank of Australia set to deliver a shallow easing cycle, housing affordability will remain stretched, weighing on the …
3rd March 2025
The Australian and New Zealand dollars have fared worse than almost every other currency over the past few months. We think they will continue to do so. The US dollar has been on the back foot lately, unwinding some of its earlier Trump-era gains as US …
25th February 2025
Having handed down a third consecutive 50bp rate cut at its meeting today, the Reserve Bank of New Zealand is likely to slow the pace of easing going forward. That said, we still think there’s a compelling case for a lower terminal rate than most are …
19th February 2025
When the Reserve Bank of Australia handed down its inaugural 25bp cut today, it indicated that any further withdrawal of monetary restriction would be limited, given residual inflationary pressures. Accordingly, we’re comfortable with our view that the …
18th February 2025
Australia’s housing slowdown continued into the new year, as demand softened further. Although the prospect of imminent rate cuts could temporarily buoy buyer sentiment, we don’t expect a meaningful rally in the housing market given that affordability is …
3rd February 2025
It’s possible that prolonged weakness in economic activity and a jump in unemployment force the RBA to cut rates more aggressively than we’re anticipating. However, a more likely scenario resulting in below-neutral rates is that a sharper-than-expected …
15th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
There was little festive cheer in Australia’s housing market last month, with house prices stagnating across the country’s eight capital cities. Given our view that the RBA has only limited room to cut interest rates over the coming year, prospects for a …
2nd January 2025
The RBA sounded more dovish today and it’s looking increasingly likely that it will lower interest rates sooner rather than later. While a downside surprise in Q4 inflation could trigger a February rate cut, we think the continued tightness of the labour …
10th December 2024
Although Australian house prices edged up a notch in November, we remain sceptical about prospects for a second wind in the housing cycle. Given that the RBA is unlikely to provide interest-rate relief until mid-2025 at the earliest, we expect the …
2nd December 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
29th November 2024
While the RBNZ started hiking rates earlier during the recent tightening cycle than the RBA, it also lifted rates to a higher peak. The RBA tempered the degree of tightening in order to preserve the large falls in unemployment seen during the pandemic and …
28th November 2024
We expect the Reserve Bank of New Zealand to cut its policy rate by 50bp, to 4.25%, at its meeting next week. With inflation back at target, the labour market loosening rapidly and activity in the doldrums, there continues to be a compelling case for the …
20th November 2024
A plunge in the average household size kept housing demand strong during the pandemic even as population growth ground to a halt. RBA estimates suggest that the average household size has remained low ever since, but economic forces point to a rebound. …
18th November 2024
The recent weakness in productivity growth is only partly due to a cyclical hangover from the pandemic as it also reflects the structural weakness in investment. With investment growth set to remain mediocre, productivity growth will remain lacklustre …
7th November 2024
Although the Reserve Bank of Australia maintained a broadly neutral stance at its meeting today, we still think it will start to lower interest rates as soon as February next year. However, with the labour market remaining resilient and productivity …
5th November 2024
Rate cuts likely to cushion house price slowdown Australia’s housing rally continued to lose steam in October. However, with the RBA set to cut interest rates from early-2025, there are good reasons not to be too bearish on the outlook for house price …
31st October 2024
With the price of crude oil continuing to climb higher, we could soon see a resurgence in fuel inflation in both Australia and New Zealand. However, if we’re right that any pickup in oil prices will prove short-lived and that second-round effects will be …
8th October 2024
The federal budget foresees an unusually large jump in cash outflows that don’t feed into the underlying cash balance in 2024/25. However, the actual boost to activity will be much smaller than the budget suggests and it will have run its course in …
3rd October 2024
We expect the RBNZ to move its easing cycle up a gear and cut the Official Cash Rate by 50bp at its meeting next week. What’s more, given the Bank’s tendency to loosen policy aggressively, we think the policy rate will eventually be slashed to 2.25%, …
2nd October 2024
Slowdown in house-price growth has further to run With new listings rising rapidly, the housing market is shifting in favour of buyers. Accordingly, we think house price growth will ease further in the months ahead. Allowing for seasonal swings, house …
1st October 2024
While banks have issued more housing loans that don’t meet APRA’s serviceability guidelines over the last couple of years, we aren’t convinced that this poses significant risks to financial stability. The Australian Prudential Regulation Authority’s …
30th September 2024
The RBA didn’t discuss a rate hike at today’s meeting for the first time since March but reiterated its pledge that it won’t cut interest rates “in the near-term”. While the risks are starting to tilt towards an earlier rate cut, we’re sticking to our …
24th September 2024
Stretched affordability to sap momentum from house price rally With transaction volumes moderating and inventory rising, we expect the Australian housing market to cool in months ahead. In seasonally-adjusted terms, house prices across Australia’s eight …
2nd September 2024
We believe that employment growth isn’t as strong as the Australian Bureau of Statistics is reporting because net migration seems to have weakened more sharply than the ABS is assuming. While it will take many months for the labour force survey to reveal …
21st August 2024
The RBNZ began its easing cycle with a 25bp rate cut at its meeting today. Although the Bank appeared to strike a cautious tone about further policy easing, we think it will cut rates more aggressively than many are anticipating. We were among the 12 …
14th August 2024
We are in the minority of forecasters who expect the Reserve Bank of New Zealand to hand down a 25bp rate cut at its meeting next week. Moreover, with excess capacity in the economy rising rapidly, we think the Bank will embark on a more aggressive easing …
7th August 2024
Although the RBA left rates on hold today, it poured cold water on market expectations that it will loosen policy later this year. With the economy still running above its speed limit, we continue to believe that rate cuts won’t be on the agenda until Q2 …
6th August 2024
