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It was no surprise that the Reserve Bank of New Zealand left interest rate at 1.75% today and again projected that rates won’t rise until the second half of next year at the earliest. More interesting was that the Bank hinted how it is going to deal with …
7th February 2018
The decent rise in employment in the fourth quarter and the fall in the unemployment rate to a decade low may go some way to calming the current fears in the financial markets. And the absence of higher wage growth emphasises that the RBNZ won’t hike …
6th February 2018
The jitters in the financial markets are due to concerns that global interest rates will rise rapidly, but the Reserve Bank of Australia (RBA) did its part to calm fears by leaving interest rates at the record low of 1.5% today and by providing a new hint …
The fall in retail sales and the deterioration in the international trade balance in December probably won’t ease the current jitters in the financial markets, but the figures aren’t as bad as they look. In fact, the outlook for consumption is arguably …
Whichever way you look at it, there is very little evidence that the health of the economy is starting to boost inflation in Australia. Out of our six key charts that take a deep dive into the latest inflation figures, four imply that inflation will …
2nd February 2018
The Reserve Bank of New Zealand (RBNZ) will almost certainly leave the official cash rate on hold at 1.75% at its policy meeting on Thursday 8th February and, in the accompanying Monetary Policy Statement (MPS), we doubt that the Bank’s interest rate …
1st February 2018
Despite the strengthening of the activity data, the Reserve Bank of Australia won’t raise interest rates from 1.5% at the meeting on Tuesday 6th February and probably won’t hint in the following Friday’s Statement on Monetary Policy that rate hikes are …
31st January 2018
It is possible that price pressures are a little stronger than the CPI data for the fourth quarter suggest. But the main message is that inflation is still hovering just below the 2-3% target and it will probably stay there for another year or two. So …
2018 will be the first year this century that the Australian economy won’t benefit from either a mining or housing boom. In those circumstances, we doubt that GDP growth will rise above 2.5%. And despite a decent fiscal boost in New Zealand, a still-weak …
28th January 2018
The resurrection of the Trans-Pacific Partnership signals that Australia is open for business, but it won’t significantly boost economic growth. A weakening in the Australian dollar from the dazzling high of US$0.81 would provide a bigger boost in the …
25th January 2018
For all the talk about how the incoming Governor will deal with employment being added to the RBNZ’s mandate, the latest data suggest he may spend most of his time wondering why inflation is so low. … New Zealand Consumer Prices …
24th January 2018
The flow of economic data released in Australia and New Zealand in recent weeks has been encouraging and suggests that after slowing in the third quarter of 2017, both economies regained some momentum at the end of last year. In Australia retail sales …
The further rise in our New Zealand Activity Proxy in November suggests that the economy regained some momentum at the end of last year. That said, the plunge in business confidence in November presents a downside risk to our forecast for GDP growth in Q4 …
23rd January 2018
Economic figures released in recent weeks have been notably stronger than expected, suggesting that the Australian economy had plenty of momentum going into the start of this year. But we doubt this is a sign that 2018 will mark the year that GDP growth …
18th January 2018
The strong rise in employment in December rounded off an exceptional year for the labour market. Jobs growth is unlikely to be as strong this year, but the labour market will still make further progress. … Australia Labour Market …
The further rise in the Westpac measure of consumer confidence in January adds to the recent run of encouraging news about the health of the household sector and suggests that the risks to our forecast that consumption growth will remain around 2.0% this …
17th January 2018
While the upbeat nature of business employment surveys suggests jobs growth should be fairly decent this year, the exceptionally strong pace of job creation in 2017 seems unlikely to be repeated. … Will jobs growth continue to soar in …
14th January 2018
2018 may be the year that the Australian economy fails to grow at a much faster pace than the majority of its peers and its interest rate premium is wiped out. This may mean that 10-year bond yields in Australia end the year no higher than in the US and …
12th January 2018
The much stronger than expected surge in retail sales values in November, alongside the decent rise in October, suggests that real consumption growth bounced back in the fourth quarter. It also tallies with other encouraging signs about the health of the …
11th January 2018
2018 is widely expected to be the year that the Reserve Banks of Australia and New Zealand start to raise interest rates from their record lows. We disagree. In this Update, we outline five of our non-consensus calls for 2018 and highlight some potential …
9th January 2018
Financial stability concerns were in the spotlight in Australia for much of 2017 and although actions by the RBA and APRA have gone some way to addressing these concerns, recent news that household debt reached a new record high in the third quarter of …
5th January 2018
The further widening in the international trade deficit in November suggests that after making a neutral contribution to GDP growth in the third quarter, the external sector was probably a drag on GDP growth in the fourth quarter of 2017. … Australia …
Our money is on the Australian economy growing by 2.5% next year rather than 3.0%, which would mean growth is weaker than most expect and interest rates are likely to stay at 1.5%. If things are worse, you should probably blame housing. If they are …
21st December 2017
The good news is that the economy grew much faster in 2015 and 2016 than we all previously thought. The bad news is this makes the recent slowdown look a bit sharper and casts further doubt on the ability of the economy to generate inflation. … New …
20th December 2017
After slowing sharply in the third quarter, there have been some encouraging signs in recent weeks about the prospects for real consumption growth in Australia in the fourth quarter. In particular, retail sales bounced back to life in October following …
The only gift the Treasurer handed out in today’s Mid-Year Economic and Fiscal Outlook (MYEFO) was the one he gave himself, namely a stronger fiscal pot that will take a bit away from GDP growth next year. That said, he appears to be saving himself for …
18th December 2017
We expect the Treasurer will use his recent windfall of up to $10bn to emphasize in Monday’s Mid-Year Economic and Fiscal Outlook that he is on track to generate a budget surplus in 2020/21 and also to lay the foundations for personal income tax cuts …
15th December 2017
Another month of extraordinarily strong jobs growth in November leaves little doubt about the current health of the labour market. That said, there is still plenty of spare capacity which will probably keep a lid on wage growth for some time yet. … …
14th December 2017
After probably slowing in the third quarter, the bounce back in our New Zealand Activity Proxy in October suggests that GDP growth started the fourth quarter on a stronger footing. … New Zealand Activity Proxy …
13th December 2017
The leap in the Westpac measure of consumer confidence in December will be a welcome sight for retailers in the middle of the all-important Christmas shopping period. Nonetheless, with household budgets still tight, we remain cautious about the outlook …
For anyone in doubt, the weakening in house prices in the third quarter all but confirms that Australia’s housing boom is over. And more up-to-date indicators suggest that prices fell further in the fourth quarter and may even decline next year. That …
12th December 2017
Australia’s rapid rate of population growth doesn’t mean that house prices will always rise as population is not the most important determinant of demand over short periods of time. In any case, it’s how the extra demand from a growing population compares …
11th December 2017
The recent shift in the composition of GDP growth in Australia has important consequences for the outlook for next year. While businesses will support growth by more than in any year since 2012, smaller contributions from households and homebuilders will …
8th December 2017
Australia has managed to notch up 12 consecutive months of an international trade surplus, but only just as the surplus slumped from $1.6bn in September to $0.1bn in October. The pollution controls in China will presumably restrain the demand for …
7th December 2017
The performance of the economy in 2018 will largely come down to whether stronger business investment can continue to compensate for weaker dwellings investment and consumption, as it did in the third quarter. Our view that GDP growth will rise from 2.2% …
6th December 2017
The Reserve Bank of Australia didn’t say as much in the statement released after it left interest rates at 1.5% for the 16th month today, but its Christmas wish must surely be for much more economic growth and a lot more inflation next year. We don’t …
5th December 2017
Today’s data releases suggest that GDP in the third quarter may have risen by just 0.2% q/q, but at least the 0.5% m/m rise in retail sales values suggests the fourth quarter may be a bit better. … Australia Retail Sales (Oct.) & GDP Partials …
While the notable strengthening in the Australian labour market this year has led to some reduction in the high levels of existing spare capacity, wage growth has remained around record lows. And the experience of other advanced economies suggests that …
1st December 2017
The third quarter private capital expenditure survey was better than expected, with the larger than normal upward revision to firms’ investment plans supporting our view that the outlook for business investment is getting brighter. … Australia Private …
30th November 2017
The narrowing in Australia’s interest rate premium highlighted by the rise in two-year government bond yields in the US in line with two-year yields in Australia for the first time in almost 20 years has contributed to the Australian dollar weakening from …
29th November 2017
Today’s announcement by the Reserve Bank of New Zealand (RBNZ) that it intends to ease existing loan-to-value (LVR) restrictions from the start of next year should provide a modest boost to housing demand. But the new coalition government’s tighter …
Recent comments by Governor Lowe about the outlook for monetary policy all but confirmed that the Reserve Bank of Australia will leave interest rates at 1.5% at its final policy meeting of the year on Tuesday 5th December, and probably for a good while …
While the sustained pick-up in employment growth so far this year provides some reason for optimism about consumer spending in the all-important Christmas period, on balance the evidence suggests that this holiday season is unlikely to provide any …
24th November 2017
The decline in our New Zealand Activity Proxy (NZAP) in September suggests that the easing in GDP growth over the past year continued in the third quarter. … New Zealand Activity Proxy …
20th November 2017
If the Reserve Bank of Australia were to learn from its recent forecasting failures, it would conclude that the unemployment rate will continue to fall by more than it expects but that underlying inflation still won’t rise much. Such a lesson could …
17th November 2017
While employment growth came off the boil in October, the labour market still appears to be simmering along nicely. The problem is that this has yet to translate into faster growth of retail sales and wages. … Australia Labour Market …
16th November 2017
Wage growth for the majority of workers may have slowed further in the third quarter as the entire rise from 1.9% in the second quarter to 2.0% was probably due to the larger-than-usual increase in the minimum wage on 1st July. The takeaway is that there …
15th November 2017
Over the next few years we expect that the relative performance of the largest states in Australia will converge, as the mining-exposed states of Queensland and Western Australia benefit most from the improving outlook for business investment and New …
10th November 2017
The Reserve Bank of Australia admitted in today’s Statement on Monetary Policy that underlying inflation will be below its 2-3% target for a year longer than it previously thought. We have been saying as much for over a year and we think the RBA may end …
More interesting than the Reserve Bank of New Zealand (RBNZ) having now left interest rates unchanged at 1.75% for a year was the Bank’s verdict on the impact of the new government. It believes that GDP growth will be fast for longer, inflation will be …
8th November 2017
