Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The Reserve Bank of Australia (RBA) sounded a little more cautious when it left interest rates unchanged at 1.50% for the 28th month. That supports our view that rates will not rise until late in 2020. … Cautious RBA may only hike rates in …
4th December 2018
We suspect the decline in house prices in the eight capital cities is going to continue and house prices will go on to eventually fall by at least 12%. … CoreLogic House Prices …
3rd December 2018
The rapid decline in the budget deficit suggests that the Government may announce higher spending or tax cuts in next year’s Budget. And Labor has pledged to eliminate a number of tax privileges if it wins the next federal election. The upshot is that the …
30th November 2018
The recent slump in crude oil prices means that the tailwind to consumer price inflation from soaring energy prices won’t be sustained. After boosting Australia’s headline inflation by 0.6 percentage points in the third quarter, automotive fuels may …
29th November 2018
The fall in private capital expenditure wasn’t as bad as the headline suggests but a slowdown in GDP growth in the third quarter will be hard to avoid. … Private Capex Survey …
The Reserve Bank of New Zealand’s decision to ease mortgage lending restrictions probably won’t result in a major pick-up in lending and home sales. And with house prices looking stretched relative to incomes and net migration slowing, we think that house …
28th November 2018
The Reserve Bank of Australia (RBA) will hold rates steady at next week’s meeting and signal that the first hike is still some way off. With the downturn in the housing market continuing unabated and the recent slump in crude oil prices likely to push …
27th November 2018
Immigration has been very strong in New Zealand in recent years but we think it will slow sharply over the next couple of years. By contrast, we don’t think that the Australian government will significantly restrain net migration despite PM Morrison’s …
23rd November 2018
Australia’s economy has become less sensitive to conditions in the US as their trade links have diminished. The upshot is that the RBA should be able to hike interest rates in 2020 even if our forecasts prove accurate and the Fed is simultaneously cutting …
21st November 2018
Policy changes and a narrowing between the relative attractiveness of Australia and New Zealand will contribute to a slowdown in net migration to New Zealand. Easing net migration will cause growth in consumption and dwellings investment to decline and is …
19th November 2018
The Australian Labor Party’s fiscal proposals may not be quite as restrictive as we had thought. But we still believe that fiscal policy would be tighter if Labor wins the next Federal election. Meanwhile, the latest batch of encouraging labour market …
16th November 2018
The unemployment rate remained at a six-year low in October and will probably fall a little further over coming months. However, we still think that wage growth will only pick up slowly and the RBA won’t be in a rush to raise interest rates. … Labour …
15th November 2018
The increase in annual wage growth from 2.1% in Q2 to 2.3% in Q3 is nothing to get excited about as it was partly driven by an increase in the minimum wage. What’s more, subdued growth in real wages means that households may soon start to respond to …
14th November 2018
We estimate that Labor’s plans to tighten fiscal policy would dampen consumer spending by around 0.3 percentage points in both 2019 and 2020, shaving 0.2 percentage points off GDP in each of those years. Meanwhile, its proposals for a number of regulatory …
13th November 2018
Both the Reserve Bank of Australia and the Reserve Bank of New Zealand displayed a little more confidence in their optimistic forecasts when they left interest rates unchanged this week. We think that in both economies, GDP growth will fall well short of …
9th November 2018
The Reserve Bank of New Zealand (RBNZ) lifted its inflation forecasts a little bit when it decided to leave interest rates unchanged at 1.75% today. But it still signalled that rates won’t rise until late in 2020. We are more pessimistic about the outlook …
7th November 2018
The recent slump in building approvals suggests that the supply overhang in the housing market may disappear next year. But we still think that the current downturn will prove to be the longest and deepest in Australia’s modern history. … House prices …
The dramatic fall in the unemployment rate to 3.9% in the third quarter should encourage the Reserve Bank and suggests that they may raise rates earlier than we had anticipated. However, we still think a slowdown in GDP growth next year will mean that …
The upward revision to the RBA’s growth and inflation forecasts suggest that the Bank is moving closer to tightening policy. But we still think that the downturn in the housing market will result in slower growth before long and retain our forecast that …
6th November 2018
The slowdown in underlying inflation in the third quarter didn’t come as a shock to the RBA. But the bigger picture is that market forces are still keeping inflation subdued. And with early signs that households are responding to the slump in the housing …
2nd November 2018
The subdued rise in real retail sales in the third quarter means that consumer spending growth probably slowed. While falling petrol prices should provide some relief to households soon, we think that the downturn in the housing market will result in …
The Reserve Bank of New Zealand will keep interest rates unchanged at 1.75% at the policy meeting on Thursday 8th November, with recent encouraging economic data making a cut less likely. Even so, we think that future economic activity will fall short of …
1st November 2018
The Reserve Bank of Australia (RBA) will welcome the continued tightening of the labour market when it holds interest rates steady at 1.50% on Melbourne Cup Day, which falls on Tuesday 6th November. But with the housing downturn accelerating and inflation …
Continued solid growth in export volumes suggests that the trade war isn’t yet acting as a major drag for Australia’s export sector. In fact, we think that the weaker exchange rate will result in a boost to GDP growth from net trade over the coming year. …
The continued fall in house prices in October is consistent with our view that prices will ultimately drop by at least 12%, making the current downturn the longest and deepest in Australia’s modern history. … CoreLogic House Prices …
The drop in inflation in the third quarter back below the 2-3% target rate won’t frighten the RBA too much, but it does look more like a scary Halloween trick than a treat. We believe the RBA will miss its inflation target for another two years. So even …
31st October 2018
Households responded to rising house prices by lifting spending and we think they will eventually respond to falling prices with lower spending. This wealth effect may lower annual GDP growth by 0.3 percentage points per year. … House prices falls will …
29th October 2018
Falling equity and house prices have both made the news this week. But when it comes to what is going to influence the Australian economy, housing matters much more. The weakening housing market is one reason why we are more cautious than most on the …
26th October 2018
Even though the unemployment rate has fallen to the Reserve Bank of Australia’s 5.0% estimate of the natural rate, the RBA will still want to see signs of much faster wage growth before it hikes interest rates. Our view that wage growth may not rise to …
19th October 2018
Whether or not the decline in the unemployment rate in September to the RBA’s estimate of the natural rate of 5.0% prompts the Bank to raise interest rates sooner depends on what happens to wage growth. Our view is that 5.0% is not the magic number and …
18th October 2018
The jump in inflation from 1.5% in Q2 to 1.9% in Q3 was largely driven by higher energy prices and won’t allow the RBNZ to conclude that underlying price pressures are strengthening. While Q3’s data suggest that a rate cut looks even less likely than …
16th October 2018
Even though Australia is strongly dependent on the health of China’s economy, it won’t suffer much from China’s escalating trade conflict with the US. If anything, in the near-term it will benefit from the recent weakening of the Australian dollar and …
15th October 2018
The recent plunge in equity prices, surge in petrol prices and rise in borrowing costs all triggered by developments overseas won’t hurt the Australian economy much. But they do add to other headwinds that will probably result in domestic demand softening …
12th October 2018
Our forecasts suggest that by the time the Reserve Banks of Australia and New Zealand get round to raising interest rates from record lows, the US Fed will already be cutting them. We think that a renewed easing in GDP growth in Australia, from 3.2% this …
10th October 2018
We doubt that the gap between the Reserve Bank of Australia’s relatively upbeat tone and the downbeat feel of the recent economic news will be sustained for long. We suspect the RBA may become a little more concerned about how credit conditions and the …
5th October 2018
The rebound in retail sales in August provides further evidence that households are still proving reasonably resilient to low income growth and falling house prices. But with house prices falling at an accelerating pace in September and petrol prices …
The small rise in the international trade surplus in August provides more evidence that the US-China trade war is not affecting Australia’s external sector. In fact, the recent weakening in the Australian dollar will probably mean that the external sector …
4th October 2018
The Reserve Bank of Australia (RBA) sounded a bit more confident in its economic outlook when it decided to leave interest rates unchanged at 1.5% for the 26th month today. But we still think that GDP growth will fall short of the Bank’s optimistic …
2nd October 2018
The largest monthly fall in house prices since the global financial crisis underlines that the current downturn may well prove to be the longest and deepest in Australia’s modern history. … CoreLogic House Prices …
1st October 2018
The shrinking budget deficit gives the Coalition government a bit more fiscal ammunition to deploy ahead of Australia’s next Federal election, while there is no way of knowing at this stage how the Royal Commission will influence the opinion polls. What …
28th September 2018
The Reserve Bank of New Zealand kept the faith in its relatively optimistic forecasts for the economy while leaving interest rates at 1.75% for the 22 nd month today, but you could argue that the policy statement sounded a bit more dovish. Our view that …
27th September 2018
The surprising strength of economic growth in the second quarter has led us to revise up our forecasts for GDP growth in the 2018 calendar year from 2.5% to 3.2% for Australia and from 2.5% to 2.7% for New Zealand. But an easing in investment growth and …
26th September 2018
Although the Reserve Bank of Australia will note the strength of the recent news on the domestic economy while leaving interest rates at 1.50% at the meeting on Tuesday 2nd October, it’s unlikely to show signs that the data have made it keener to raise …
25th September 2018
After revamping all our forecasts, we have concluded that the RBA and the RBNZ probably won’t raise interest rates until late in 2020 and late in 2021 respectively. That explains why we now expect the Australian dollar to weaken to US$0.65 next year and …
21st September 2018
The Reserve Bank of New Zealand will keep interest rates unchanged at 1.75% at the policy meeting on Thursday 27th September and will probably acknowledge that GDP growth in Q2 was stronger than it had anticipated. But we still think that economic …
20th September 2018
The solid rise in GDP in the second quarter will give the RBNZ more confidence in its view that GDP growth will rise back above 3.0% next year. In contrast, we believe that low confidence, a soft housing market and easing net migration will result in …
Our new forecast that the Reserve Bank of Australia won’t raise interest rates from the record low of 1.5% until late in 2020 compares to the consensus view that lift-off will take place late next year. That partly explains why we now expect the …
17th September 2018
This week the Australian economy took one more step towards meeting the conditions that would require higher interest rates, but it may be another 12-18 months at the least before the RBA has enough confidence in the outlook for wages growth to pull the …
14th September 2018
The labour market is edging closer to the conditions that are necessary to trigger faster wage growth, but it may be another couple of years yet before it gets there. … Labour Market …
13th September 2018
The bulk of the recent leap in GDP growth has been driven by the behaviour of businesses, but firms probably won’t be able to support growth for long. An easing in private investment growth is one reason why we think GDP growth will slow from about 3.2% …
10th September 2018
