Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
We’re not too keen on the plans of the Australian Treasurer to distinguish “good” debt from “bad” debt in the Federal Budget on Tuesday, but we do like the sound of a budget that is expected to allocate more funds to spending on infrastructure. That would …
5th May 2017
The upbeat tone of the Statement on Monetary Policy confirms that the Reserve Bank of Australia has become less worried about low inflation and that further interest rates cuts have become much less likely. But the RBA is not expecting inflation to rise …
The international trade surplus is well past its peak and will probably continue to fall in the coming months. What’s more, the nominal surplus in the first quarter won’t prevent net exports from subtracting from real GDP. We estimate that the 1.1% q/q …
4th May 2017
While the Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at its policy meeting on Thursday 11 th May, in light of the stronger-than-anticipated first-quarter inflation figures the RBNZ may adjust its OCR …
While employment growth strengthened in the first quarter and the unemployment rate dropped back below 5.0%, wage growth remained stubbornly low. We believe that wage growth will remained fairly muted for some time yet, which is one reason why we expect …
3rd May 2017
The Reserve Bank of Australia left interest rates on hold at 1.5% for the eighth meeting in a row today and we doubt it will be in a position to raise rates until at least 2019. There is still a risk that a further deterioration in the labour market …
2nd May 2017
The recent rises in underlying inflation suggest that the period of extremely low inflation in both Australia and New Zealand has come to an end. Underlying inflation, which excludes the temporary influence of the most volatile items, rose from 1.5% to …
1st May 2017
The rise in inflation in Australia in the first quarter was good news as it suggests the period of very low inflation is now over. But it is also bad news as it means prices are now rising faster than wages. And the resulting squeeze on real wages is …
28th April 2017
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at the meeting on Tuesday 2nd May and, in a change to our central forecast, we now no longer expect it to cut rates further this year. That said, interest rates are …
27th April 2017
Underlying inflation in Australia is by no means strong but, when coupled with the RBA’s financial stability concerns, it doesn’t appear to be weak enough to prompt the RBA to cut interest rates further. We no longer expect interest rates to fall from …
26th April 2017
Our New Zealand Activity Proxy (NZAP) indicates that the slowdown in GDP growth at the end of last year was temporary. In fact, February’s NZAP is consistent with a pick-up in GDP growth, from 0.4% q/q to around 1.0% q/q, in the first quarter. … New …
24th April 2017
The period of ultra-low inflation in New Zealand is well and truly over. While we still believe that the financial markets are too hawkish in expecting the official cash rate to start rising this year, the recent strengthening in underlying price …
21st April 2017
The further strengthening in underlying price pressures in the first quarter has increased the chances that the RBNZ will raise interest rates earlier than we had been expecting. Both we and the RBNZ had thought rates would not be raised until 2019. … New …
20th April 2017
We doubt that the surge in Australian employment in March will mark the beginning of a sustained rebound in employment growth. Indeed, a deeper dive into the latest employment trends in different sectors and states supports our view that jobs growth will …
13th April 2017
The huge leap in employment in March looks suspicious to us and we think the stagnation in the unemployment rate at a 14-month high of 5.9% is a better signal of the state of the labour market. That rate is close to the 6% plus mark that we think would …
The latest data suggest that we are right to be more downbeat than most on the outlook for Australia this year but more upbeat than most on the prospects for New Zealand. While both economies will benefit to some degree from the recent improvement in …
12th April 2017
The Westpac measure of consumer confidence nudged down only slightly in April, which is a welcome sight following the recent string of disappointingly weak data on household spending. That said, confidence is still at levels consistent with a modest …
The outright fall in retail sales values in February raises fresh concerns about the health of the retail sector. Admittedly, some of the recent weakness is due to temporary factors. But there are other factors holding back spending that are likely to …
7th April 2017
The Reserve Bank of Australia (RBA) was always going to leave interest rates at 1.5% today, but there are some subtle signs that the Bank is becoming more concerned about the outlook for the labour market and underlying inflation, but less concerned about …
4th April 2017
The rebound in the trade surplus is mainly due to the reversal of the distortion caused by Chinese New Year that suppressed the surplus in January. But with commodity prices having started to edge lower and the legacy of Cyclone Debbie currently reducing …
The outright fall in retail sales values in February adds to growing evidence that real consumption growth probably eased in the first quarter, while the latest news on the housing market has remained strong. … Retail Sales & Building Approvals …
3rd April 2017
The recent damage caused by Cyclone Debbie is clearly devastating for those households and businesses in Queensland that have been most affected. And it will leave a fairly large dent in Queensland’s economy, at least in the near-term. But it won’t …
31st March 2017
Today’s announcement that the Australian Prudential Regulation Authority has introduced tighter mortgage lending rules will go some way to addressing the RBA’s concerns about the overheating housing market and the associated risks to financial stability. …
Although the Reserve Bank of Australia’s meeting on Tuesday 4th April won’t be very exciting, as the RBA will leave interest rates at 1.5% for the sixth meeting in a row, events over the next month could make May’s meeting much more interesting. By then …
28th March 2017
Although Australian banks will probably soon be hit by more stringent mortgage lending rules, they can take some comfort from an interest rate environment that will probably be fairly favourable over the next couple of years for their net interest …
24th March 2017
The rebound in GDP growth in Australia in the fourth quarter and the easing in New Zealand appear to imply that the neighbouring nations are experiencing a change of fortunes. But we doubt this is a sign of things to come. While subdued domestic demand …
23rd March 2017
The Reserve Bank of New Zealand used today’s decision to leave interest rates at 1.75% to emphasise once again that rates won’t be raised either this year or next. The financial markets are slowly getting the message, but there is still plenty of scope …
22nd March 2017
The acceleration in house price inflation in the fourth quarter of last year has undoubtedly continued into the start of this year and will remain a thorn in the side of the Reserve Bank of Australia for a while yet. But the recent rises in mortgage rates …
21st March 2017
House prices in Australia are rising at their fastest pace since 2010 and the recent surge in auction clearance rates suggests that a further pick-up is on the cards. However, most other leading indicators point to an easing in house price inflation and …
17th March 2017
While there is a consensus among economists and financial markets alike that the Reserve Bank of New Zealand will keep rates on hold at 1.75% when it meets next Thursday 23 rd March, we believe that financial markets have gone too far by pricing in the …
16th March 2017
The stronger than expected rise in the unemployment rate and the pick-up in the underutilisation rate, which is a broader measure of spare capacity, suggests that there is still plenty of slack in the labour market. As such, the labour market is unlikely …
While GDP growth in the fourth quarter of last year was weaker than most had expected, this was largely the result of temporary factors and as such we expect growth in New Zealand to bounce back early this year. … New Zealand GDP (Q4 …
15th March 2017
While the Westpac consumer confidence headline index held steady in March, the further weakening in confidence surrounding the housing market is consistent with an easing in house price inflation in the coming quarters. … Australia Consumer Confidence …
An easing in economic growth in China coupled with the downside risks to Australia posed by the potential policies of President Trump will mean that the Reserve Bank of Australia won’t follow the US Fed by raising interest rates until 2019 at the …
12th March 2017
Although we still believe that the next move in interest rates in Australia will be down, it is useful to consider what would need to happen to prompt the RBA to raise rates. Two scenarios stand out. The first is where the strong global economy and the …
10th March 2017
The statement released after the Reserve Bank of Australia today left interest rates at 1.5% remained fairly balanced, but recent speeches have made it clear that the RBA doesn’t intend to cut interest rates again. We think the combination of weaker …
7th March 2017
The 0.4% m/m rise in retail sales in January was a welcome sight following the outright fall in sales in December, but it doesn’t change the bigger picture that with wage growth likely to remain close to record lows this year the household sector won’t be …
6th March 2017
If the falls in the various measures of national income in Australia in 2015 constituted an income recession, then the surge in the fourth quarter of last year looks like a mini income boom. Whether or not this translates into a period of much stronger …
3rd March 2017
The sharp drop in the trade surplus in January suggests that net exports will provide a sizeable drag on growth in the current quarter. And while rising consumption goods imports suggest that the surge in commodity prices is boosting domestic demand, this …
2nd March 2017
Recent comments by Governor Lowe have made it pretty clear that the Reserve Bank of Australia doesn’t intend to cut interest rates further, including at its next policy meeting on Tuesday 7 th March. That’s not too surprising given the RBA remains fairly …
1st March 2017
The decent rebound in real GDP in the fourth quarter doesn’t just dash any lingering fears that Australia was in a recession, but it also boosts hopes that the surge in commodity prices will trigger a rapid recovery. … Australia GDP …
The idea that Australian employees could enjoy a period of “catch-up” wage growth is a pipe dream. It doesn’t stack up in theory and it doesn’t stack up in practice. It’s far more likely that cyclical and structural forces will keep wage growth close to …
24th February 2017
While there is some tentative evidence that non-mining business investment is rising, it certainly isn’t rising as fast as widely hoped. This doesn’t surprise us as we’ve been saying for a long time that excess capacity and the structural decline in the …
23rd February 2017
The notable improvement in a number of leading activity indicators in the past month or so is consistent with a sizeable pick-up in GDP growth in Australia. But we remain cautious about the prospects of sharp rebound. For one, although the drag from …
22nd February 2017
You’d be forgiven for thinking that given the Federal government’s desire for fiscal restraint, Australia is unlikely to follow Trump’s lead on public infrastructure. But State governments are actually already embarking on an investment spending spree of …
17th February 2017
There is definitely a role for the Reserve Bank of Australia to manage expectations by signalling where it thinks the economy is heading. But by sounding more optimistic than its own forecasts, there’s a danger that the RBA has moved from signal to spin. …
16th February 2017
January’s labour market figures highlight that jobs growth has sustained its recent momentum, but the now-familiar problem of the new jobs being mostly part-time ones rather than full-time ones also reared its ugly head again. This will prevent wage …
The rebound in the Westpac measure of consumer confidence in February and the surge in the NAB measure of business confidence in January suggests that any lingering concerns over the outright fall in GDP in the third quarter of last year have well and …
15th February 2017
In February’s Statement on Monetary Policy the Reserve Bank of Australia drew particular attention to the recent pick up in mortgage lending to investors. Given its concerns, if investor lending remains elevated this may prove to be a barrier to further …
10th February 2017
The new forecasts published in February’s Statement of Monetary Policy show that the RBA is largely expecting Australia’s slow growth and low underlying inflation problems to be solved over the next couple of years. In that sense, the RBA is almost …
