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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
Private investment probably fell for the third consecutive quarter in Q1 and firms’ forecasts point to further declines over coming quarters. … Private Capex Survey …
We expect the current housing downturn to end around the turn of the year. We think that house prices may rise by 3% from their trough in 2020 and by 5% in 2021. While rising house prices should boost consumption growth, the drag on dwellings investment …
29th May 2019
The Reserve Bank of Australia (RBA) has telegraphed that it will cut interest rates to 1.25% in June and we think it will follow up with another 25bp cut in August. But we suspect that further easing will be needed to lift GDP growth towards potential and …
28th May 2019
Proposed changes by Australia’s bank regulator will increase the maximum loan size for some borrowers. While that is unlikely to bolster housing demand much at this stage, as the RBA lowers interest rates the effect should become more pronounced and …
24th May 2019
The RBA has made it clear that quantitative easing is its preferred tool once interest rates reach the effective lower bound. But we suspect that the Bank would first cut interest rates from their current level of 1.5% to 0.5% or lower before QE is …
21st May 2019
The Coalition government’s surprise victory in the federal election won’t make much of a difference for fiscal policy in the near-term but will result in smaller surpluses beyond 2022. It also improves the outlook for the housing market and corporate …
20th May 2019
Employment growth has picked up over the last couple of months, but with the labour force expanding even faster the unemployment rate has started to rise. With GDP growth below potential and underlying inflation well below target, we suspect that will be …
17th May 2019
The rise in unemployment in April was largely due to a jump in the labour force participation rate so the RBA may not feel pressured to ease policy immediately. But as unemployment remains high over the coming months, we reiterate our view that the RBA …
16th May 2019
The stagnation in wage growth in the first quarter underlines that the tighter labour market isn’t boosting cost pressures and supports our view that the Reserve Bank of Australia will cut interest rates soon. … Wage Price Index …
15th May 2019
The RBA left rates on hold this week while the RBNZ cut. That’s odd as the case for a rate cut looks much stronger in Australia. In any case, we think that rates will need to fall in Australia as well, not least because fiscal policy may soon become …
10th May 2019
The Reserve Bank of Australia’s (RBA) Statement on Monetary Policy (SMP) sounded a little more upbeat than the statement issued after the Bank kept rates on hold on Tuesday. We still think that the Bank is too optimistic about the outlook and that rates …
Strong business credit growth could be a sign that firms are becoming more upbeat about the outlook for business investment. In reality though, the data tend to lag actual investment spending and we still expect business investment to fall by 2% this …
9th May 2019
Subdued economic growth and a softening labour market mean that today’s interest rate cut by the Reserve Bank of New Zealand will be repeated before the year is out. … New Zealand - RBNZ will cut again before the year is …
8th May 2019
The Reserve Bank of Australia made only the slightest downward revisions to its forecasts when it left interest rates unchanged at 1.50% today. But it noted that further improvements in the labour market will be needed for meeting its inflation target, …
7th May 2019
Subdued growth in real retail sales in Q1 means consumption growth may have eased from the end of 2018. Meanwhile falling import volumes probably meant that net trade made a solid contribution to GDP growth in Q1. Taken together, we estimate GDP growth …
China’s slower housing and infrastructure investment growth will weigh on demand for iron ore and metallurgical coal. Further increases in services exports are unlikely to offset that drag. The coming years will therefore be challenging ones for Australia …
6th May 2019
The pace of house price declines has eased in recent months and forward indicators suggest there may be a further slowdown ahead. However, we still expect houses prices to fall by 15% from their peak. And with mounting signs that the housing downturn is …
3rd May 2019
We expect the recent string of soft economic data will be enough for the Reserve Bank of New Zealand (RBNZ) to cut rates to 1.50% when it meets next week on Wednesday 8th May. Since the RBNZ shifted to an easing bias in March the economic data have …
2nd May 2019
The economic outlook has deteriorated in both Australia and New Zealand. In Australia, the downturn in the housing market and falling business confidence should mean that GDP growth will continue to soften. In New Zealand, we expect GDP growth to remain …
30th April 2019
Labor has pledged sizeable tax hikes that probably won’t be offset by higher expenditure, which means that fiscal policy will almost certainly be tighter under a Labor government than under the Coalition. However, a lot will depend on whether Labor can …
29th April 2019
We suspect that the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates to 1.25% on Tuesday 7th May. And given that we expect the labour market to start slackening …
The easing in underlying inflation this week prompted a sharp decline in market interest rate expectations. That makes sense because an equally weak inflation print prompted the RBA to cut interest rates three years ago despite continued improvements in …
26th April 2019
The softening in underlying inflation puts increasing pressure on the RBA to cut interest rates. We still expect the RBA to cut rates in August but the risks of an earlier cut have increased. … Consumer Prices …
24th April 2019
Our New Zealand Activity Proxy (NZAP) has picked up in early 2019, which suggests GDP growth may be bottoming out. That said, economic activity is likely to remain subdued over 2019 as business investment continues to falter and global growth eases. … New …
23rd April 2019
As the economic outlook has softened the RBA is inching closer to a rate cut. The analyst consensus has now come around to our view and foresees two 25bp cuts by early next year. But we think that the reduced potency of monetary policy combined with the …
18th April 2019
The solid employment gain in March doesn’t resolve the tension between weak activity and healthy labour market data. Our view is that the drag from the housing downturn will eventually win the upper hand and that the RBA will cut interest rates before …
The easing in headline inflation in Q1 increases the pressure on the Reserve Bank to cut rates at their next meeting in May. And with weak growth set to keep a lid on inflation, we think they will cut once more before the year is out. … New Zealand - …
17th April 2019
China announced this week that its anti-dumping investigation into Australian barley imports will drag on longer than planned, fuelling tensions between the two countries further. While China’s small reliance on coal imports means it could tighten earlier …
12th April 2019
A slowing global economy will magnify the headwinds from the housing downturn in Australia and slower net migration in New Zealand. We think that GDP growth will slow more sharply than most anticipate and expect central banks in both countries to lower …
9th April 2019
This week both the government and the opposition laid out their fiscal plans if they were to win the next election, with both sides promising significant income tax cuts. But given the negative gearing restrictions and removal of the franking credits …
5th April 2019
The strong 0.8% m/m rise in retail sales in February suggests that consumption growth may not have declined further in Q1, but we think the housing downturn will mean growth remains subdued in 2019. Meanwhile the fresh record trade surplus in February was …
3rd April 2019
The Coalition government’s Budget for 2019/20 promises additional tax cuts while still achieving a budget surplus. Labor will probably win next month’s federal election and we suspect it will at least match the proposed cuts. But that may not be enough to …
2nd April 2019
The Reserve Bank of Australia sounded more cautious when it left interest rates unchanged at 1.50% today. With the full impact of the housing downturn on economic activity yet to be felt, we think the Bank will start to cut interest rates soon, perhaps as …
We Expect house prices in the eight capital cities to fall by at least another 6%, though our sales-to-new-listings ratio points to smaller declines in coming months. … CoreLogic House Prices …
1st April 2019
