Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Rising interest rates will result in the RBA making further losses in the years ahead. The Bank’s existing reserves should be enough to absorb those losses in a benign scenario, but the Bank will stop paying a dividend. And in a worst-case scenario, the …
9th November 2021
RBNZ to hike by 50bp later this month The sharp decline in New Zealand’s unemployment rate last quarter came despite the strict lockdown implemented in Q3. What’s more, most measures of labour market slack included in the RBNZ labour market suite showed a …
5th November 2021
If the RBA hiked rates by nearly 200bp as the financial markets were anticipating until recently, households’ debt servicing burden would hit an all-time high and housing would become the least affordable since the global financial crisis. That would slow …
3rd November 2021
Striking labour market improvement points to more aggressive hiking cycle The decline in the unemployment rate to 3.4% should encourage the RBNZ to hike rates more aggressively than we had previously anticipated in the months ahead. The massive 2.0% q/q …
2nd November 2021
The RBA abandoned its yield target and its pledge that rates will remain low until 2024 today, but still sounded dovish. While the financial markets expect the first rate hike in May next year, we expect the Bank to wait until early-2023. The Bank pinned …
House prices will come off the boil next year Strong demand means that house prices will keep rising at a strong pace over the next few months, but we think that lending restrictions will result in a slowdown next year. Across the eight capital cities, …
1st November 2021
Trimmed mean inflation rose to 2.1% in Australia in Q3, the first time it has entered the RBA’s 2-3% target band since 2015. Even more strikingly, trimmed mean inflation in New Zealand rose to 4.4%, way above the top end of the RBNZ’s 1-3% target. One …
29th October 2021
RBA throws in the towel With retail sales rebounding even before lockdowns ended and nearly 90% of the population now fully vaccinated, our previous forecast that consumption will rebound by just 3.5% q/q in Q4 following a 10% q/q plunge in Q3 is no …
Consumption to surpass pre-delta high in Q1 2022 The rise in retail sales in September means that the trough in consumption is now behind us. We expect retail sales to rebound in Q4 as restrictions relax and a growing number of Australians are able to …
Underlying inflation strongest in years, but wage growth has yet to pick-up RBA to shift forward guidance for first rate hike to 2023 in February, ditch yield target We think the first hike will happen in early-2023 The acceleration in underlying …
27th October 2021
Strong underlying inflation will keep pressure on the RBA The decline in headline inflation in Q3 was entirely driven by base effects. More importantly, the strong rise in underlying inflation will keep pressure on the RBA to keep reducing monetary …
Surging inflation puts pressure on RBNZ The 2.2% q/q rise in New Zealand’s consumer prices was the strongest since 2011 and well above the RBNZ’s forecast of a 1.4% increase. In fact, the quarterly increase was enough to meet the RBNZ’s 1-3% annual …
22nd October 2021
A renewed tightening of the labour market next year means that wage growth will accelerate further. That pick-up will be underpinned by a stronger minimum wage hike, the lifting of caps on public sector wage growth and more employees switching jobs. And …
21st October 2021
Surging inflation will add fuel to RBNZ hiking cycle While we think the surge in inflation will start to abate in the year ahead, the strength will surely be worrying the RBNZ, supporting the case for further rate hikes. Consumer prices rose 2.2% q/q in …
18th October 2021
Doubling migration would rebuild the population The fresh New South Wales premier Dominic Perrottet has received advice that Australia should double its pre-virus level of migration to offset the recent weakness in population growth. The border closure …
15th October 2021
Overview – Domestic demand is set to rebound from recent lockdowns and labour markets should remain tight. Meanwhile, soaring energy and food prices will keep inflation high for a prolonged period. To be sure, the Reserve Bank of Australia won’t respond …
14th October 2021
Unemployment rate to fall towards 4% next year While employment plunged yet again in September, hours worked started to rebound and the end of lockdowns will result in a rapid recovery in the labour market over coming months. The 138,000 fall in …
Australia’s exports to China are even more vulnerable to a slowdown in the property sector than they were before the trade spat as iron ore has gained in importance. We think that China’s steel demand will fall before long and even if it doesn’t, a shift …
13th October 2021
The RBNZ hiked rates by 25bp this week even as the RBA still sounded dovish. The near-term outlook for both economies is similar. Both are emerging from prolonged lockdowns with around 80% of the eligible population having received one jab and more than …
8th October 2021
The RBNZ’s decision to begin its hiking cycle while Auckland is still in lockdown highlights that the New Zealand economy is on the brink of overheating. And as restrictions ease, we think the Bank will continue hiking rates in the months ahead. Today’s …
6th October 2021
The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already . As universally anticipated, the Bank kept its interest rate and asset …
5th October 2021
Record trade surplus to support growth The record trade surplus in August came despite the plunge in iron ore prices in August. The upshot is that net trade should provide a boost to GDP growth in Q3 as domestic demand weakens. Export values of goods and …
Rising living costs will eventually worry RBA We brought forward our forecast for the Bank of England’s first rate hike from 2023 to 2022 last week as second-round effects of higher commodity prices have started to emerge. A similar story is unfolding in …
1st October 2021
House price growth will ease in 2022 House prices have continued to surge despite the recent lockdowns. But we expect house price growth to slow next year as affordability constraints bite and macroprudential limits are imposed. Across the eight capital …
The RBA expects headline inflation to drop back from 3.8% in Q2 to 1.5% by mid-2022. By contrast, we now only expect it to fall to 2.5% over this period, reflecting the pass-through from soaring coal, gas and food prices. We also expect the recent …
30th September 2021
New Zealand has eased its strict lockdown RBNZ still keen to lift rates in October Rates will be gradually raised to 1.50% by the middle of next year New Zealand has slowed the spread of the Delta variant and eased its lockdown, which stopped the RBNZ …
29th September 2021
Labour market should cope well with impact of lockdowns Slump in net migration means that staff shortages won’t ease soon Wage growth still set to accelerate next year, paving way for rate hikes in early-2023 With the latest lockdowns set to end next …
28th September 2021
Rising house prices threaten financial stability The 17.4% annual rise in house prices in August was the strongest in nearly two decades and prices are set to rise the most since the 1980s by year-end. A speech by RBA Assistant Governor Bullock this week …
24th September 2021
High and rising household debt in Australia and New Zealand will limit central banks’ scope to hike interest rates. The upshot is that we expect the RBNZ to hike rates by a modest 125bp in the tightening cycle set to start next month, while the RBA’s …
23rd September 2021
Soaring shipping costs will exacerbate the impact of the weaker exchange rate on import price inflation. Indeed, we expect underlying inflation to return into the RBA’s 2-3% target next year. “Core” consumer goods prices rose by a subdued 0.3% q/q in Q2, …
20th September 2021
Solid GDP consistent with October rate hike The 2.8% rise in New Zealand’s production GDP in Q2 nearly returned output to its pre-virus trend. That’s an incredible achievement given the slump in net migration and that foreign tourists were just 14% of …
17th September 2021
Labour market to approach full employment by end-2022 Employment plunged by 1.1% m/m in August, but we still think that the unemployment rate won’t surpass it pre-Delta level over the coming months even as the participation rate rebounds . The 146,300 …
16th September 2021
Plunge and a rebound ahead The strength in activity in Q2 was partly driven by the travel bubble which burst in Q3 as New Zealand went into lockdown. While we expect domestic demand to recover toward the end of the year, services trade may not rebound as …
We doubt that any independent review of Australia’s monetary policy framework would result in a change to the RBA’s 2-3% inflation target. But the Bank could be forced to put more emphasis on house prices, reduce the frequency of Board meetings, and …
15th September 2021
New South Wales poised to reopen in October This week New South Wales (NSW) Premier Gladys Berejiklian laid out her plan for the state to begin to ease Covid-19 restrictions. We already knew that reopening would hinge on 70% of the adult population …
10th September 2021
Economic activity in New Zealand took a significant hit as the country was plunged into its strictest level of lockdown in August. But New Zealand’s success at taming the virus means output should return to its pre-Delta path by Q1 and the RBNZ will begin …
9th September 2021
While the RBA pressed ahead with tapering its asset purchases today, the financial markets are too optimistic in pricing in rate hikes as soon as next year . The RBA kept its interest rate targets unchanged at 0.10% as widely anticipated, but the more …
7th September 2021
Delta undefeatable in Australia Victoria joined New South Wales (NSW) in abandoning the zero-Covid strategy this week, declaring the Delta Variant ‘undefeatable’. Even so, the state government opted not to meaningfully ease restrictions. Instead, the …
3rd September 2021
Trade should support growth in Q3 The record trade surplus in July was largely driven by stronger commodity prices which won’t last. But we expect weaker domestic demand to weigh on imports over the coming months which should see trade make a positive …
2nd September 2021
Acceleration in vaccine rollout means lockdowns unlikely to last much longer RBA will probably press ahead with tapering However, Bank unlikely to tighten as early as next year as financial markets expect The health situation in Australia continues to …
1st September 2021
Output to plunge in Q2, but recession unlikely 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 . The 0.7% q/q rise in output marked a …
Lockdowns weighing on house price growth The drag from the current lockdowns on the housing market won’t last, but we expect house price growth to slow in earnest next year as affordability constraints bite. Across the eight capital cities, house prices …
NSW easing a damb squib Yesterday’s announcement by New South Wales (NSW) that it will ease restrictions for fully vaccinated people was disappointing. Sydney residents in areas under a curfew will be allowed to have a picnic from mid-September, but that …
27th August 2021
Sales will fall further before rebounding The decline in retail sales in July highlights the impact that lockdowns are having on the Australian economy. And with lockdowns spreading and intensifying in August, sales will fall further before they rebound. …
New Zealand has entered a draconian lockdown and new infections continue to rise. The lockdown prompted the RBNZ to refrain from hiking interest rates at its August meeting and financial markets were only pricing in a 50% chance of a rate hike in October …
26th August 2021
Firms still keen to invest when lockdowns ease We estimate that private investment rose by 1.5% q/q in Q2 and firms’ expectations of future capital expenditure suggest firms are still keen to invest when lockdowns ease. Today’s private capital expenditure …
The recent reimposition of the strictest level of lockdown in New Zealand was enough to prevent the RBNZ from hiking rates in August. And our assumption that restrictions will now remain in place until near the end of this year means we now expect the …
20th August 2021
Lockdown upends RBNZ’s plans In contrast to what most had expected, the RBNZ didn’t become the first central bank in an advanced economy to hike interest rates after the pandemic at Wednesday’s meeting. The statement made it clear that the Bank was keen …
Falling unemployment rate should keep RBA on track The further decline in the unemployment rate in July may not last long, but it should be more than enough to convince the RBA to proceed with its plans to taper asset purchases in September. The 2,200 …
19th August 2021
The RBNZ sounded hawkish when it left rates on hold today, but the decision demonstrates that the Bank is taking a cautious approach in light of the current lockdown. Assuming restrictions can be eased before long we still expect the Bank to hike rates to …
18th August 2021
