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While leaving interest rates on hold at 1.75% today, the Reserve Bank of New Zealand suggested that the next move in interest rates is more likely to be up than down. But since we largely agree with the Bank that rates are unlikely to rise until 2019, …
8th February 2017
We wouldn’t rule it out completely, but it is looking less likely that Australia fell into its first recession since 1991 at the end of last year. However, a sustained period of stronger growth is not on the cards either. Instead, 2017 will probably be …
7th February 2017
We believe that the Reserve Bank of Australia is being too complacent in expecting GDP growth to be close to 3% over the next couple of years and underlying inflation to rise to 2.0%. So while the RBA today left interest rates at 1.5%, we suspect it may …
The rise in real retail sales in the fourth quarter suggests that real consumption growth rebounded, but the outright fall in nominal sales in December reveals a worrying lack of momentum heading into 2017. … Australia Retail Sales …
6th February 2017
The roots of the swing in Australia’s international trade balance from a record deficit at the end of 2015 to a record surplus in December 2016 lie firmly in the huge rise in commodity prices rather than a big rise in the volume of exports being shipped …
3rd February 2017
The Reserve Bank of New Zealand will undoubtedly keep rates on hold at 1.75% at its meeting on Thursday 9 th February, but in the accompanying Monetary Policy Statement we suspect it will revise up its inflation projections. That said, while the financial …
2nd February 2017
The surge in the trade surplus to a record high in December shows that the rise in commodity prices is boosting the economy and it has dramatically reduced the chances that Australia fell into a recession late last year. That’s despite other news that has …
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at its policy meeting on Tuesday 7 th February, but its new forecasts to be published in the Statement on Monetary Policy on Friday 10 th may provide a hint that …
1st February 2017
While employment growth remained decent in the fourth quarter, a sharp increase in the labour force meant that the unemployment rate jumped back above 5.0%. This won’t worry the RBNZ too much, but the chances of it raising interest rates this year are …
31st January 2017
Australia will make almost no progress this year with GDP growth once again coming in closer to 2.0% than 3.0%. With growth in New Zealand set to accelerate from around 3.0% to 3.5%, the divergence in the economic fortunes of the two neighbours will …
30th January 2017
While the fourth-quarter inflation figures received most of the attention in the last week, growth in the Westpac leading index reached a three-year high and it is consistent with a sharp rebound in GDP growth in Australia in the coming months. We expect …
27th January 2017
The sharp rise in both headline and core CPI inflation in the fourth quarter is enough to prevent the RBNZ from cutting interest rates further, but it’s not enough to prompt it to raise interest rates this year. … New Zealand Consumer Prices …
25th January 2017
The rebound in headline inflation in the fourth quarter of last year has been baked in the cake for some time, so the real news is that underlying inflation hardly budged at all. A continuation of this trend may yet prompt the RBA to cut interest rates to …
Signs that inflation in both Australia and New Zealand has passed its low point may give the Australian and New Zealand dollars a bit of a boost when the data for the fourth quarter are released this Wednesday and Thursday. But while the rise in petrol …
20th January 2017
The Australian economy has started to reap some benefits from the rise in key commodity prices towards the end of last year. Most obviously, the trade balance has swung into surplus for the first since time 2014. That’s a good indication that nominal GDP …
19th January 2017
While the labour market improved in December from the weakness of the third quarter, it remained worryingly fragile. This is one reason to expect 2017 to be another disappointing year for the overall economy. … Australia Labour Market …
The Westpac measure of consumer confidence remained essentially unchanged in January, which was a disappointing result given that local equity prices have recently risen rapidly. That said, confidence is still at a level consistent with the annual rate of …
18th January 2017
After contributing 0.5 percentage points to the annual rate of GDP growth in Australia in each of the past two years, it looks as though dwellings investment will add almost nothing to growth this year. This is one reason why we believe that 2017 will be …
13th January 2017
While the slower-than-expected growth in retail sales in November does suggest that the household sector may have lost a bit of momentum late in the fourth quarter, the strong start to the quarter means real consumption growth probably still rebounded. … …
10th January 2017
The first trade surplus since March 2014 isn’t quite as good as it looks as it’s due to a surge in the prices of exports rather than the volume of exports. This means that net exports were probably still a large drag on real GDP growth in the fourth …
6th January 2017
The recent weakening in the Australian dollar to a seven-month low against the US dollar won’t boost activity and inflation by as much as you may think as it has not been matched by a weakening in the broader dollar trade-weighted index. What’s more, if …
The range of possible economic outcomes for next year are wider than usual and it is possible that 2017 proves to be a sweet spot for both Australia and New Zealand. But it seems more likely that a slowdown in economic growth in China and a corresponding …
22nd December 2016
The further strengthening in economic growth in the third quarter increases the chances that the Reserve Bank of New Zealand won’t need to cut interest rates further. But it is probably too soon to conclude that New Zealand’s low inflation problem has …
21st December 2016
The 0.5% q/q fall in GDP in the third quarter and the weak tone of October’s international trade data have raised the chances that Australia will experience its first recession in 25 years. We wouldn’t completely rule out the possibility of a second …
The ratings agencies have shown that they are full of Christmas cheer by maintaining Australia’s AAA credit rating even though the Mid-Year Economic and Fiscal Outlook revealed that the budget deficit will be a cumulative $10bn higher over the next four …
19th December 2016
Even if the ratings agencies were to take away Australia’s AAA credit rating immediately after the publication of the Mid-year Economic and Fiscal Outlook on Monday, which we suspect will reveal that the budget forecasts are moving further away from …
16th December 2016
The improvement in jobs growth in recent months provides further evidence that the fall in GDP in the third quarter was a blip rather than anything more worrying. But while the lower underemployment rate does suggests that the excess labour supply is …
15th December 2016
The recent rise in the share of people working part-time but who would like to work longer will continue to restrain wage growth for another couple of years yet. This part-time problem means that a further fall in the unemployment rate is unlikely to lead …
14th December 2016
The fall in consumer confidence to an eight-month low in December shows that households have been spooked by the decline in GDP in the third quarter. While confidence is still consistent with a decent rate of consumption growth, lower sentiment is not …
The rebound in business confidence in November supports our view that Australia is unlikely to fall into its first recession in 25 years in the fourth quarter. But the ABS house price data for the third quarter imply that the housing market is not as hot …
13th December 2016
The fall in GDP in the third quarter means that the data for the fourth quarter will determine whether or not Australia succumbs to its first recession in 25 years. We think it will escape, but only just. Either way, the bigger picture is that GDP growth …
9th December 2016
The unexpected widening in the trade deficit in October is worrying as it implies net exports may be a big drag on GDP growth in the fourth quarter. After yesterday’s news that GDP contracted in the third quarter, this means the chances of a recession …
8th December 2016
The 0.5% q/q fall in GDP in the third quarter has raised the possibility that the first recession, defined as two consecutive quarters of falling output, in 25 years has begun. But while the GDP data confirm that we have been right to be more concerned …
7th December 2016
The 0.5% q/q fall in GDP in the third quarter is unlikely to mark the start of a recession as GDP will probably rebound in the fourth quarter. Even so, it highlights that the economy is not strong enough to generate much more inflation. This supports our …
After leaving interest rates on hold at 1.5% today, the Reserve Bank of Australia remained fairly optimistic on the outlook for activity even though the economy may have contracted in the third quarter. We’re not too concerned about the outlook either, …
6th December 2016
If the Australian economy did indeed stagnate or contract in the third quarter, it needs to be seen in the context of the unusual strength in the previous two quarters. This means there’s probably no need to sound the recession alarm, although a softening …
2nd December 2016
The stronger-than-expected rise in retail sales in October will be a welcome sight for retailers in the lead up to the all-important Christmas spending period and suggests that the probable slowdown in real consumption growth in the third quarter may not …
The weak third-quarter private capital expenditure survey adds to other evidence that suggests the economy may not have grown at all in the third quarter. It also confirms that the transition towards non-mining investment is taking place at a snail’s …
1st December 2016
The Reserve Bank of Australia is unlikely to play either Santa or Scrooge at its meeting on Tuesday 6th December, as it will almost certainly leave interest rates on hold at 1.5%. And we believe that the markets have got ahead of themselves by starting to …
30th November 2016
It’s now possible that the Australian economy didn’t grow at all in the third quarter. It may even have contracted. That would be hard to ignore, especially when jobs growth has slumped to a two-year low at the same time. So it is worth considering …
25th November 2016
The recent earthquake in New Zealand may put a small dent in activity in the near-term, but it won’t prevent the economy from growing by around 3.5% next year. In fact, the extra boost to activity from the necessary reconstruction work could mean that GDP …
24th November 2016
Financial markets look to have jumped the gun by concluding that the chance of a further interest rate cut in Australia has all but vanished. We think that the weak outlook for wage growth may yet prompt the central bank to cut rates further. … Wage …
18th November 2016
While employment increased in October for the first time since July, revisions to September’s figures meant that the annual rate of employment growth fell to a two-year low of 0.9% y/y, which will do little to allay growing concerns about the health of …
17th November 2016
The recent leap in the prices of the main commodity exports of Australia and New Zealand will boost domestic demand in both economies, but it is unlikely to lead to much faster wage growth and much higher underlying inflation. That’s because businesses …
15th November 2016
While Trump’s election win is still causing some uncertainty in financial markets, attention in New Zealand has swiftly moved to the kiwi dollar following comments by Governor Wheeler that the RBNZ has an “open mind” to the possibility of using foreign …
11th November 2016
The Reserve Bank of New Zealand showed that business carries on as usual with Trump as US President as today it met its previous pledge to cut interest rates from 2.00% to 1.75%. What’s more, yesterday’s financial market volatility didn’t stop it from …
10th November 2016
The now-probable election of Donald Trump as US President will continue to send shockwaves through the financial markets for a while yet. But we suspect it won’t be long before the bulk of these moves are reversed as the election of Trump as US President …
9th November 2016
Despite the modest fall in the Westpac measure of consumer confidence in November, confidence levels suggest that any slowdown in consumption growth won’t be too severe. More worryingly, the rise in the index measuring unemployment expectations adds to …
While the structural shift towards part-time employment has further to run, an easing in economic growth in industries with a higher than average share of part-time employees suggests that the speed at which part-time employment is rising may soon peak. … …
7th November 2016
Should Donald Trump pull off a surprise victory in Tuesday’s US Presidential election, equities, bond yields, commodity prices and the Australian and New Zealand dollars would probably all fall. But those moves would probably be reversed before long as it …
4th November 2016
