Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Strong jobs growth unlikely to last The RBA’s latest Statement on Monetary Policy highlighted the tension between soft income and GDP growth on the one hand and strong employment growth on the other hand. We’ll have to wait until early September to find …
16th August 2019
Labour market to deteriorate further this year The strong rise in employment in July failed to make any inroads into the pool of unemployed workers. Employment growth is set to falter, pushing up the unemployment rate further before long. The 41,100 …
15th August 2019
Wage growth will fall to 2% next year Wage growth treaded water in the second quarter and the recent loosening of the labour market suggests it will fall to 2% before long. The 0.6% q/q rise in the wage price index in Q2 was a touch stronger than the …
14th August 2019
The recent slump in dwelling starts means that housing supply will fall short of demand from next year. That suggests that house prices will continue to rise over the coming months. The number of newly-built houses has outstripped the demand from …
8th August 2019
RBNZ cuts while RBA holds In Australia, the RBA kept rates on hold at 1.0% this week, as widely expected. But the Bank acknowledged that the uncertainty generated by the trade war had increased and noted that it would “ease monetary policy further if …
The Reserve Bank of New Zealand cut rates dramatically to 1.0% at today’s monetary policy meeting. But given our more pessimistic forecasts of the New Zealand economy, we don’t think that the Bank is done easing and now expect it will cut rates again in …
7th August 2019
The RBA adopted an easing bias when it left interest rates unchanged today. With the labour market set to loosen further, we expect the Bank to slash rates to 0.5% by early-2020. The RBA’s decision to leave interest rates unchanged at 1.0% was correctly …
6th August 2019
Net trade will continue to be the main driver of Australian growth We estimate that net trade boosted GDP growth in Q2, providing a glimmer of hope amidst the bleak domestic outlook. The trade balance surged from an upwardly revised surplus of $6173mn in …
Strength in the labour market won’t last long The sharp fall in the unemployment rate is unlikely to prevent the RBNZ from cutting rates tomorrow given that labour market data are volatile and often prone to revision. What’s more, we expect the …
Hopes of strong rebound dashed Data released this week provide further evidence that the economy is performing below capacity. Admittedly, house prices appear to be bottoming out. Average house prices in the eight capital cities edged up in July. What’s …
2nd August 2019
Consumption growth remained weak second quarter The weakness in real retail sales in Q2 suggests consumption growth remained sluggish in the second quarter. That’s one reason why we expect GDP growth to slow from 2.8% in 2018 to just 1.5% this year. …
The New Zealand economic outlook remains sour… …And the RBNZ have signalled they are ready to act Rates will be cut in August and again in November The Reserve Bank’s Monetary Policy Committee sounded almost ready to cut rates at its last meeting in June. …
1st August 2019
Housing downturn may be bottoming out House prices appear to be bottoming with an average increase in prices across the eight capital cities in July. We expect prices will remain around this level for the rest of 2019 before rising by 3% in 2020 and 5% in …
The RBA will pause in August following back to back rate cuts… …But given the weakness in the economy, the RBA will cut rates to 0.5% by early 2020 Lowe may be venturing into the world of forward guidance We expect the Reserve Bank of Australia to take a …
31st July 2019
Underlying inflation to fall further below RBA’s target Underlying inflation remained subdued in the second quarter and we think increasing spare capacity in the Australian economy means it will fall further below the RBA’s 2-3% target over the next year. …
The slowdown in domestic economic activity along with global trade tensions is becoming more of a concern for businesses in both countries. That means that sentiment has not been bolstered by the stimulus that has been injected into each economy. Lower …
30th July 2019
Is the inflation target still fit for purpose? Treasurer Josh Frydenburg revealed this week that he is currently reviewing the RBA’s inflation target in preparation to sign the Statement on the Conduct of Monetary Policy, along with Governor Lowe. The …
26th July 2019
Commercial banks in New Zealand have kicked up a fuss over a proposal by the Reserve Bank to increase the level of capital the banks are required to hold. By contrast, we believe the new rules won’t result in a major increase in bank lending rates or a …
25th July 2019
Australia’s corporate tax rate remains one of the highest in the world. However, the boost to GDP growth from lowering it towards the levels seen elsewhere would probably be quite small. The government has started to reduce the corporate tax rate from 30% …
24th July 2019
The federal government has urged state governments to step up infrastructure spending. But given the deterioration in their finances, we suspect that states are more likely to reduce capital spending. Urban Infrastructure Minister Alan Tudge indicated …
22nd July 2019
Slump in gas prices a major concern Reports this week have suggested that the United States will overtake Australia and Qatar to become the world’s biggest exporter of liquefied natural gas (LNG) by 2024. Gas production has soared in recent years, …
19th July 2019
Labour market to deteriorate further this year We think the slowdown in employment growth has further to run and suspect that the deterioration in the labour market will cause the unemployment rate to rise before the year is out. Employment was almost …
18th July 2019
Our central scenario is that cutting interest rates to 0.5% will be sufficient to restore growth and eventually return underlying inflation to the RBA’s target. If more stimulus were required, the government would probably remain reluctant to loosen …
17th July 2019
Underlying inflation won’t pick up much from here We doubt the strength in inflation in Q2 will be maintained for long and we expect underlying inflation to remain below the mid-point of the RBNZ’s 1-3% target band for the foreseeable future. That’s why …
16th July 2019
Don’t hold your breath for a big rebound At the start of the year, we forecast that the housing downturn would weigh on consumption growth and residential construction causing GDP growth to slow much more sharply than the consensus believed. (See here .) …
12th July 2019
Overview - Australia’s housing downturn will probably come to an end towards the end of the year. That means that the drag from falling housing wealth on consumer spending will subside. It also means that homebuilding will become more attractive again. …
10th July 2019
RBA reiterates call for fiscal stimulus The RBA cut rates by 25bp to 1.0% on Tuesday. Following the 25bp cut in June, that marked the first time the RBA has delivered back to back rate cuts since 2012. With rates approaching the zero lower bound, Governor …
5th July 2019
Consumption growth to remain soft in the second quarter The weakness in retail sales so far in Q2 suggests consumption growth remained sluggish in the second quarter. Sluggish consumption is one reason why we expect GDP growth to slow from 2.8% in 2018 to …
4th July 2019
Record trade surplus provides a little support to net exports in Q2 The record trade surplus in May was supported by the recent surge in iron ore prices so will not completely flow through to stronger net exports in Q2. Even so, we expect net trade to …
3rd July 2019
While the RBA lowered the cash rate to 1.0% at today’s meeting, it signalled that it won’t ease policy any further for now. However, we think that the Bank remains too optimistic about the outlook for the labour market and inflation. Accordingly, we’ve …
2nd July 2019
The subdued global outlook and weakness in domestic economic activity has caused us to revise down our forecasts for interest rates in Australia and New Zealand. In Australia, annual GDP growth slowed to just 1.8% in the first quarter of 2019 and the …
1st July 2019
Prices may rise in 2020 We expect the pace of house price declines will continue to gradually ease this year with house prices reaching a trough by the end of the year. We suspect house prices may start to rise again thereafter, by 3% in 2020 and 5% in …
Dovish RBNZ As expected, the RBNZ kept the official cash rate on hold at 1.50% this week. But given the Bank’s dovish tone and our downbeat forecasts for New Zealand’s economy, we now think the RBNZ will cut rates twice this year. (See here .) Admittedly, …
28th June 2019
The RBNZ’s dovish tone supports our view that the Bank will cut rates again before the year is out. In fact, we now think the Bank will cut at its next meeting in August, and once more at its November meeting. The Bank’s decision to hold rates unchanged …
26th June 2019
We expect another cut to 1.0% at the July meeting RBA has indicated that it wants the unemployment rate to fall to 4.5% Rates reaching lower bound opens door for quantitative easing We expect the Reserve Bank of Australia to cut interest rates to 1.0% at …
25th June 2019
The RBA seems to be getting more concerned about a slowdown in China’s GDP growth and the recent slowdown in visitor arrivals from China will only exacerbate those worries. Meanwhile, Governor Lowe said that the RBA was unlikely to pursue QE anytime soon. …
21st June 2019
GDP growth in Q1 was stronger than the RBNZ had forecast and the Bank will have been encouraged by the government’s stimulatory Budget. As such, the RBNZ is likely to take a ‘wait and see’ approach when it leaves rates on hold on at 1.50% on Wednesday …
20th June 2019
Growth in New Zealand is likely to remain soft throughout 2019 as subdued business conditions and weak global growth weigh on the economy. Indeed, we expect annual growth to slow from 2.9% in 2018 to just 2.2% this year. … New Zealand - GDP …
The RBA has moved closer to our view that the natural unemployment may be as low as 4.0%. That means unemployment would need to fall considerably before wage pressures begin to emerge. And we think the unemployment rate is more likely to rise this year …
14th June 2019
The surge in employment in May is unlikely to be sustained as the softness in economic activity limits employment growth. We expect the unemployment rate to rise to 5.3% before the end of the year. … Labour Market …
13th June 2019
Our forecast that the housing downturn would weigh on economic activity and force the RBA to cut rates was proven right this week. And given recent data suggest there is considerable spare capacity in the economy, we believe the RBA will have to reduce …
7th June 2019
The smaller trade surplus in April largely reflects commodity price movements so we expect net trade will still make a positive contribution to growth in Q2. … International Trade …
6th June 2019
Some of Australia’s banks have lowered mortgage rates by less than the reduction in the RBA’s cash rate. That’s hard to justify in light of the recent fall in funding costs. We think that mortgage rates will fall by 80bp if the RBA cuts rates to 0.75% as …
5th June 2019
The economy is off to a rough start in 2019, and we suspect that things won’t get better anytime soon. Indeed, we expect the housing downturn to remain a drag on the economic outlook over the rest of 2019 causing growth to slow from 2.8% in 2018 to 1.5% …
We think that today’s 25bp rate cut may be followed by two additional rate cuts before the year is out. Combined with renewed falls in iron ore prices, that suggests that the Australian dollar may weaken again before long. … RBA may have to cut rates to …
4th June 2019
The fall in retail sales in April demonstrates that the housing downturn is continuing to weigh on consumption growth. And we expect subdued consumption growth will continue to dash any hopes of a rebound in GDP growth throughout 2019. … Retail Sales …
The deterioration in the New Zealand and Australian economies is starting to flow through to a softening in the labour market. Admittedly, employment growth in Australia has risen to the highest rate in ten months. But the rate of jobs growth isn’t strong …
3rd June 2019
We expect the pace of house price declines to gradually ease this year with house prices reaching a trough by the end of the year. We suspect house prices may start to rise again thereafter, by 3% in 2020 and 5% in 2021. … CoreLogic House Prices …
Business investment probably dropped again in Q1 and with business confidence remaining weak we think private investment will continue to decline over the rest of 2019. By contrast, we suspect the housing downturn may come to an end by the end of the …
31st May 2019
Significant increases in operating and capital spending are a welcome takeaway from today’s Budget. But the economic impact is likely to be modest and the government is still expected to be a drag on the economic outlook before long. … New Zealand - …
30th May 2019
