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The dovish tone of the RBA's March minutes has heightened the risks to our forecast for two more 25bp rate hikes in April and May. However, the Board did reiterate that its decision regarding a pause would hinge on the economic data released before its …
24th March 2023
RBA not done hiking yet The minutes of the RBA’s latest meeting confirm that the RBA is close to ending its tightening cycle, but we suspect that the strength of the latest labour force data will prompt it to deliver two more 25bp rate hikes. Contrary to …
21st March 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
Click here to read the full report Overview – Both the RBA and the RBNZ have more work to do to rein in the recent surge in inflation. That aggressive monetary tightening is starting to take its toll on economic activity and we expect GDP growth to slow …
Amid growing concerns about the global economic backdrop , financial markets not only believe that the RBA is done tightening, but that rate cuts are on the horizon. (See Chart 1.) However, we’re not convinced. The latest data don’t yet show domestic …
17th March 2023
Red-hot labour market will prompt further RBA tightening February’s strong labour force figures will prompt the Reserve Bank of Australia to press ahead with another 25bp hike at its April meeting despite mounting signs of strain in the global banking …
16th March 2023
Economy is tipping into recession With the New Zealand economy in for more pain on the heels of the Q4 GDP decline, we expect the RBNZ to start cutting rates towards the end of the year. The -0.6% q/q drop in production GDP was weaker than most had …
15th March 2023
RBNZ will cut rates by year-end as recession takes hold The -0.6% q/q contraction in production GDP was weaker than most had expected, but a tad stronger than our forecast (Refinitiv Consensus: -0.2%; CE: -1.5%). And crucially, it was much weaker than the …
The fracturing of strategic supply chains into US and China trade blocs threatens Australia’s existing significant trade with China but also presents Australia with an opportunity to align its trade relationships with its existing security …
Australian banks are unlikely to experience the same valuation losses that resulted in the demise of Silicon Valley Bank. The biggest risk is that a freezing up of overseas bond markets shuts down funding avenues for the major banks, but the Reserve Bank …
14th March 2023
Governor Phil Lowe’s proclamation at Wednesday’s AFR business summit that the RBA was closer to a pause in interest-rate increases has fed speculation of a dovish pivot on the part of the Board. Indeed, financial markets have tamped down their …
10th March 2023
The Reserve Bank of Australia signalled that further tightening will be needed when it hiked the cash rate to 3.60% today and we’re sticking to our forecast that the Bank will lift the cash rate to 4.10% by May . The RBA’s decision to lift the cash rate …
7th March 2023
RBA will hike the cash rate to 4.10% The RBA signalled that further tightening will be needed when it hiked the cash rate to 3.6% today and we’re sticking to our forecast that the Bank will lift the cash rate to 4.10% by May. The RBA’s decision to lift …
Net exports should support GDP growth in Q1 Although the rise in export earnings lagged growth in the import bill in January, we still think net trade will provide a decent boost to GDP growth this quarter. The decline in the trade surplus in January, …
Net exports will support GDP growth in Q1 Notwithstanding a fall in the trade surplus in January, we think net trade is likely to provide a boost to GDP growth in Q1. The decline in the trade surplus, from $13bn to $11.7bn in January came in below the …
With labour productivity falling the most on record over the past year, unit labour cost growth has surged even as hourly earnings growth has remained sluggish. While we expect productivity growth to rebound, we also expect hourly earnings growth to …
6th March 2023
While Q4 GDP was broadly in line with our expectations , a look under the hood shows that the Australian consumer is on much weaker ground than we had anticipated. The starting point for our pessimism is the ongoing weakness in household incomes. Indeed, …
3rd March 2023
Although the fall in house prices slowed significantly in February, we are not convinced that Australia’s housing market is out of the woods yet. Even so, there are growing indications that dwellings investment will take less of a hit than we had …
2nd March 2023
RBA’s hawkishness suggests rates will rise for a few more months However, softer incoming data suggest that the peak in rates isn’t far off Looming slowdown in activity and inflation opens door for rate cuts before year-end The RBA adopted a more …
1st March 2023
Stretched affordability will continue to push down prices Although the decline in house prices slowed markedly in February, we’re not convinced the worst is over. As such, we expect house prices to fall by another 6% before the year is up. The 0.2% m/m …
Slowdown in inflation won’t prevent RBA from lifting rates to 4.1% GDP growth softened last quarter and inflation slowed sharply in January. But with inflation still very high, that won’t prevent the RBA from hiking the cash rate to a peak of 4.1% in May …
GDP growth will slow sharply this year GDP growth softened last quarter and inflation slowed sharply in January. But with inflation still very high, that won’t prevent the RBA from hiking the cash rate to a peak of 4.1% in May. The 0.5% q/q rise in Q4 GDP …
Goods spending will fall for second consecutive quarter While retail sales bounced back in January, the rebound probably won’t be enough to prevent a contraction in sales volumes across the first quarter . The 1.9% m/m rise in retail sales in January was …
28th February 2023
Sales volumes will probably fall further this quarter While retail sales bounced back in January, the rebound probably won’t be enough to prevent a contraction in sales volumes across the first quarter. The 1.9% m/m rise in retail sales in January was …
Over the past week we’ve learned two important pieces of information. First, the housing downturn, which has been the most rapid in Australia’s modern history so far, came to an abrupt halt in February as prices bounced back in Sydney and Melbourne. …
24th February 2023
House prices bounced back in February, led by Sydney. While leading indicators point to an improvement in housing market activity, the RBA’s determination to raise interest rates further means that affordability will remain extraordinarily stretched. …
Investment prospects remain weak despite Q4 jump Private investment picked up firmly last quarter and although firms expect capital spending to remain relatively healthy, their projections are consistent with a slowdown in real terms this financial year. …
23rd February 2023
The war in Ukraine. Ageing populations. Rising temperatures. Investors are having to grapple with a formidable range of uncertainties around the long-term outlook for the global economy and markets. Their challenge is compounded by the fracturing of the …
22nd February 2023
Even though the Reserve Bank of New Zealand slowed the pace of tightening at today’s meeting, it still signalled a peak in the overnight cash rate of 5.50% by the middle of this year. Our more pessimistic forecasts for economic activity and wage growth …
Wage growth will peak at just below 4% With the risk of a wage-price spiral contained, we expect the RBA to start cutting interest rates by year-end. The 0.8% q/q rise in hourly wages excluding bonuses was below the analyst consensus of 1% and our own …
Bank will lift rates to 5.25% The RBNZ slowed the pace of tightening this month and we suspect it will now only lift the overnight cash rate to 5.25% instead of our previous forecast of 5.5%. The Bank’s decision to slow the pace of tightening from the …
Wage growth will peak around 4% Wage growth was weaker than the RBA had expected last quarter and we think it won’t accelerate as rapidly as the RBA anticipates. The 0.8% q/q rise in hourly wages excluding bonuses was weaker than the analyst consensus of …
RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
21st February 2023
Rent inflation is set to approach 10% as the surge in net migration coupled with lower home completions has pushed rental vacancy rates to record low. But that rise will be overwhelmed by the slowdown in new dwellings purchases, underlining that the …
20th February 2023
The 11,500 drop in employment in January marked the second consecutive fall and we think it marks the beginning of a sustained period of labour market slackening. In annual terms, employment will still be up around 2.5% this quarter, but if our downbeat …
17th February 2023
Labour market will continue to slacken The weakness in January’s labour market data shows that rapid rate hikes are starting to cool activity, but with inflation still far too high that won’t prevent the RBA from tightening policy for a while yet. The …
16th February 2023
Labour market will continue to loosen The weakness in January’s labour market data underlines that aggressive monetary tightening is starting to cool activity, but with inflation still far too high, that won’t prevent the RBA from hiking interest rates …
The 6.9% annual rise in Australia’s trimmed mean CPI in Q4 was stronger than the RBA’s November forecast and has prompted some hawkish rhetoric from the Bank at its February meeting. Indeed, we now expect the cash rate to peak at 4.10% in May instead of …
15th February 2023
Data a touch softer than expected, but not soft enough for RBNZ to back away We still expect rates to peak at 5.5% by the middle of this year Looming recession will prompt looser policy by year-end The incoming data have been a touch softer than the RBNZ …
With trimmed mean inflation surpassing the Bank’s November forecast in Q4, the RBA turned more hawkish when it lifted the cash rate by 25bp on Tuesday. Today’s Statement on Monetary Policy shows that the Bank expects inflation to only touch the top end of …
10th February 2023
The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. The Bank’s decision to lift the cash rate from …
7th February 2023
RBA signals further interest rate hikes ahead The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. …
Boost from net trade should ensure decent rise in Q4 GDP Export volumes probably edged up last quarter while import volumes plunged so net trade should provide a boost to Q4 GDP growth. The decline in the trade surplus in December, from $13.5bn to …
Boost from net trade should ensure decent rise in Q4 GDP Export volumes probably edged up last quarter while import volumes plunged so net trade should provide a sizeable boost to Q4 GDP growth. The decline in the trade surplus in December, from $13.5bn …
Australia’s house prices are still falling rapidly and there is no bottom in sight. According to CoreLogic, prices in the eight capital cities fell another 1.1% m/m in January – the same pace of decline as in each of the three months before. That took the …
3rd February 2023
Consumption remains resilient and labour market still very tight With inflation still accelerating, we expect the cash rate to reach 3.85% by April However, sharp slowdown in activity and inflation will prompt rate cuts by year-end The incoming data …
31st January 2023
Further rise in services spending will prevent fall in Q4 consumption Retail sales volumes declined last quarter on the back of a weaker-than-expected end to 2022. A solid increase in services spending means overall consumption should still have risen at …
This week’s Australian CPI data delivered an unwelcome surprise for the RBA. The headline rate rose from 7.3% to 7.8% in Q4, compared with an analyst consensus of 7.5%. While that was lower than the RBA had been expecting back in November (8.0%), the …
27th January 2023
Stubbornly high inflation will prompt further RBA rate hikes Inflation rose further last quarter and remains far too high for the RBA’s liking. Accordingly, we’re sticking to our non-consensus forecast that the Bank will lift the cash rate to 3.85% by …
25th January 2023
