Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Consumption will fall in Q1 and plunge in Q2 T he 0.5% rise in retail sales in February precedes the significant spread of the virus in Australia and we think consumption will fall sharply the coming months . The 0.5% m/m rise in retail sales values in …
3rd April 2020
Tensions in interbank and bond market easing Corporate bond spreads remain high but not high enough for RBA to buy private bonds With inflation set to fall short of its target for years to come, negative rates still an option The recent easing in …
2nd April 2020
New Zealand is now in a near-total lockdown for at least four weeks. And we wouldn’t be surprised if the lockdown lasted for two months. With no construction or non-food manufacturing taking place, activity will be hit hard. We have pencilled in a 30% q/q …
1st April 2020
House prices may decline before long We think the continued rebound in house prices will come to an end before long as the virus outbreak reduces the volume of home sales and weighs on household incomes. House prices across the eight capital cities rose …
The government assumes that around a quarter of all employees will benefit from the huge wage subsidy unveiled today. Indeed, we now expect the unemployment rate to peak at 12% instead of our previous estimate of 15%. But that still implies an …
30th March 2020
New Zealand in Lockdown, Australia on the brink This week New Zealand entered a near-total lockdown in an effort to contain the spread of the coronavirus. The restrictions are more draconian than in most other countries that have imposed lockdowns. …
27th March 2020
We estimate that a lockdown that would limit activity to “essential services” could knock off as much as 30-40% from Australia’s GDP for as long as it lasts. A lockdown is imminent and our best guess is that it will last for around two months. The upshot …
The ban on home auctions and open house viewings will probably result in lower home sales and there’s a growing risk that the government will ban the buying and selling of real estate altogether. Even once restrictions to prevent the spread of coronavirus …
25th March 2020
New Zealand is set to enter a near-total lockdown this week which will cause economic activity to all but stop. The RBNZ launched quantitative easing today, but we think that more monetary stimulus will be needed. We expect the Bank to cut the OCR into …
23rd March 2020
Australia is moving closer to shutting down a large share of its services sector and we now expect GDP to fall by 4% this year. The government is responding with a second, larger fiscal stimulus package that should prevent the recession from turning into …
Economic outlook grim As measures in place to contain the virus have grown more severe, the economic outlook in Australia has naturally become even bleaker. This week Scott Morrison announced that Australia’s borders are shut to all non-Australians. In …
20th March 2020
We suspect that the fiscal stimulus package that will be unveiled over the weekend will focus on limiting the damage from the coronavirus outbreak rather than on providing a large boost to demand. Measures will include wage subsidies for employers and …
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
19th March 2020
Unemployment rate will surge this year Today’s data show that the coronavirus did not have a significant impact on the Australian domestic economy in February. Even so, we think the draconian restrictions put in place will result in economic activity …
Growth was subdued even before the virus outbreak The decline in GDP growth in New Zealand in the fourth quarter shows that the economy was struggling even before the Covid-19 outbreak which will surely drag the New Zealand economy into recession in the …
18th March 2020
The draconian coronavirus containment measures adopted by Australia’s government mean that we now expect GDP to fall by 2% this year. The Australian government is likely to respond with a larger fiscal stimulus package than the one announced last week …
While the New Zealand government’s large stimulus package will soften the blow from the coronavirus outbreak, it will not prevent a recession. As such, we still expect the RBNZ to launch quantitative easing in the coming weeks. The government today …
17th March 2020
Australian firms were in good shape on the eve of the coronavirus outbreak, but the impending collapse in foreign tourism and weaker retail spending will lift loan write-offs in those sectors. The banks aren’t as well prepared to weather those loan losses …
New comprehensive restrictions on travel mean that both Australia and New Zealand are headed for recession. We expect the Reserve Bank of New Zealand to follow up today’s emergency 75bp rate cut with quantitative easing before long. And the Reserve Bank …
16th March 2020
Consumption will be weak despite oil price drop The price of Brent crude oil fell sharply from $45 per barrel at the end of last week to US$32 now. We expect prices to gradually recover to around US$48 per barrel by the end of the year. But the key point …
13th March 2020
The large fiscal stimulus package unveiled today may be able to prevent a recession. But we still expect the RBA to cut rates to 0.25% and launch quantitative easing over the next few months. The fiscal stimulus package presented by the federal government …
12th March 2020
We think that the coronavirus outbreak and the related disruptions in China and to tourism more broadly will push the New Zealand economy into recession. That’s why we expect the RBNZ to slash rates by 75bp to help offset the impact of the coronavirus …
11th March 2020
In a moderate scenario where demand returns to pre-coronavirus levels by year-end, we estimate that the outbreak of the disease will knock off 1% from GDP growth this year. In a more severe scenario where the disruptions last beyond the end of the year, …
10th March 2020
Most central banks that have introduced quantitative easing in recent years have done so by pledging to buy a certain amount of government bonds. Our base case is that the RBA will do the same when it launches QE over the coming months, but a yield target …
9th March 2020
Economic outlook grim GDP growth slowed a touch to 0.5% q/q in Q4. And with data from January showing signs of weakness even before the impact of the coronavirus, our forecast that GDP contracted by 0.1% in Q1 is now looking optimistic. The trade surplus …
6th March 2020
Worst is yet to come for retail sector Retail sales fell for the second consecutive month in January. And given that this happened before the coronavirus started to spread in Australia in earnest, the outlook for consumption remains weak. The 0.3% m/m …
We expect the Treasury to announce only a small fiscal package of around $2bn in response to the coronavirus outbreak. With economic activity slowing sharply and revenues undershooting expectations, that should be enough to thwart the government’s aim of …
5th March 2020
Worst is yet to come for trade The small decline in the trade surplus in January masks larger weakness in both export and import values. And we think the coronavirus outbreak means that exports have further to fall in the coming months . The trade surplus …
GDP growth will weaken further in 2020 GDP growth remained subdued at the end of last year, and given the fallout from the coronavirus outbreak we expect the economy to deteriorate further in 2020. The 0.5% quarterly rise in GDP was a touch faster …
4th March 2020
With the impact of the coronavirus on economic activity set to intensify, we expect the RBA to follow up today’s 25bp rate cut with another 25bp cut in April. It looks increasingly likely that the disease will weigh on the labour market, which raises the …
3rd March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
The slump in China’s PMIs in February and the continued spread of the coronavirus beyond China has raised the odds that the RBA will cut interest rates at tomorrow’s meeting. On balance though, we still think the Bank will wait until April before cutting …
House prices may rise by 10% this year The rally in house prices continued in February and all the leading indicators suggest that prices will keep rising at a rapid pace. However, affordability is deteriorating rapidly and we expect price growth to slow …
Mixed bag of data for private investment The capex survey in Q4 provided mixed news for private investment. The survey showed the sharpest fall in real capital expenditure since 2016. Admittedly, the construction work done data, which were also released …
28th February 2020
Drag from private investment will fade by the middle of this year We estimate that investment fell sharply, by 1.5% q/q in Q4. But firms’ expectations of a pick-up in nominal capital expenditure in the next financial year suggest the drag from private …
27th February 2020
We estimate GDP growth in Australia continued to muddle along in Q4, edging up from 0.4% q/q in Q3 to 0.5% q/q. In New Zealand, we think a stronger contribution from net trade was offset by a decline in inventories and softer consumption growth, causing …
26th February 2020
We estimate that the disruptions to China’s economic activity in the wake of the coronavirus will reduce Australia’s total exports by 3% this month. The drag from fewer Chinese students and tourists arriving in the country could reduce exports by another …
25th February 2020
Bank remains concerned that cutting rates further will undermine financial stability But coronavirus outbreak set to dampen activity and unemployment will climb further We’ve pencilled in a 25bp cut in April and July The Reserve Bank of Australia remains …
Unemployment rate jumps to 5.3% The unemployment rate jumped in January from 5.1% at the end of 2019 to 5.3%. And that’s despite the ABS excluding the areas of Australia that were worst hit by the bushfires. It’s possible that the number of unemployed …
21st February 2020
Unemployment rate may rise to 5.5% The jump in the unemployment rate in January probably isn’t enough by itself to convince the RBA to cut rates. But we think the weakness in the underlying economy will keep pushing the unemployment rate higher in the …
20th February 2020
Wage growth set to slow further Wage growth remained subdued in the fourth quarter and we expect it to weaken further over the coming quarters. That should eventually convince the RBA to cut interest rates to 0.25%. The 0.5% quarterly rise in the wage …
19th February 2020
Travel ban extended until February 22 nd The ban on travel from China to Australia was set to end this weekend. But given the continued growth in infections of the coronavirus in China it has now been extended to 22 nd February. That’s not particularly …
14th February 2020
Rising housing wealth may encourage households to spend a larger share of their incomes. But we expect income growth to weaken again as jobs growth slows and rising unemployment keeps a lid on wage growth. The upshot is that consumption growth may remain …
13th February 2020
The New Zealand government’s $12 billion infrastructure package should contribute to a pick-up in business investment and GDP growth from the second half of this year. That supports our view that interest rates have now reached a trough in New Zealand. We …
The Reserve Bank of New Zealand sounded confident when it left rates on hold today and we think the improvement in underlying economic conditions means the RBNZ’s easing cycle is now over. The Bank’s decision to keep rates on hold was correctly …
12th February 2020
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
10th February 2020
Growth in Q4 set to remain subdued The decline in retail sales in December is consistent with our view that the surge in sales in November was driven by Black Friday discounts. After adjusting for price effects, real retail sales rose by 0.5% in Q4, the …
7th February 2020
The ultimate impact of the coronavirus outbreak in China on the Australian economy will depend on how quickly the virus is brought under control. But given the disruption that has already happened to tourism and to Chinese demand for Australian goods …
6th February 2020
GDP growth in Q1 probably remained subdued The pick-up in real retail sales provides some hope that consumption growth may have turned a corner. Even so, we still think GDP growth remained subdued at the end of 2019. Retail sales values fell by 0.5% m/m …
Coronavirus will hit the New Zealand economy in the near term. But indicators point to an improvement in economic activity. So we think the RBNZ is done cutting rates. The new coronavirus will inevitably impact the New Zealand economy in the first quarter …
5th February 2020
