Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The Reserve Bank of Australia hasn’t done itself any favours by providing no real hints that interest rates will fall below 1.5%, as the resulting strengthening in the dollar will make it even harder for it to raise inflation back to the 2-3% target. The …
5th August 2016
The Reserve Bank of Australia used its new Statement on Monetary Policy to suggest that it hasn’t got much appetite for cutting interest rates below 1.5%, although its own inflation forecasts suggest it might have to. We suspect that the RBA’s hand will …
The weaker-than-expected rise in real retail sales in the second quarter points to a slowdown in consumption growth and adds to the mounting evidence that GDP growth weakened significantly, perhaps to less than 0.5% q/q, last quarter. … Australia Retail …
4th August 2016
When the Reserve Bank of New Zealand meets on Thursday 11 th August, we expect it to cut interest rates from 2.25% to 2.00% and to confirm that it is willing to reduce rates further. A stubbornly high exchange rate, low inflation expectations and subdued …
The slimmed-down labour market release suggests that employment growth weakened a little in the second quarter. The RBNZ will be more worried, however, to see that there is still no sign of inflationary pressure in the labour market. This makes it even …
3rd August 2016
If it is going to weaken the Australian dollar to help solve its low inflation problem, the Reserve Bank of Australia may have to follow today’s 0.25% interest rate cut to a new record low of 1.5% with more cuts to 1.0% sometime next year. The dollar may …
2nd August 2016
The weak outlook for inflation is enough on its own to prompt the RBA to cut interest rates to 1.5% at the policy meeting later today, but mounting evidence that economic growth lost a lot of momentum in the second quarter should seal the deal. … …
We believe that a new era of stubbornly low underlying inflation will prompt policymakers to cut interest rates in Australia from 1.75% now to 1.00% next year and to reduce rates in New Zealand from 2.25% to 1.50%. The problem is that hardly any inflation …
1st August 2016
Australia’s inflation data for the second quarter provided something for everyone, but the bigger picture is that there is very little price pressure anywhere in the economy. This is why we believe the RBA will cut interest rates to 1.5% on Tuesday and …
29th July 2016
While the second-quarter inflation figures were somewhat mixed, we still expect that the most likely outcome at the Reserve Bank of Australia’s policy meeting on Tuesday 2nd August is an interest rate cut from 1.75% to 1.50%. The Statement on Monetary …
28th July 2016
The CPI inflation data for the second quarter makes next Tuesday’s RBA policy meeting a closer call than had looked likely, but we still think the RBA will pull the trigger and cut interest rates to 1.5%. In fact, continued low inflation may mean that …
27th July 2016
The recent experience of the Reserve Bank of New Zealand provides two lessons for the Reserve Bank of Australia. First, don’t dither when it comes to making decisions otherwise you’ll be punished by a stronger currency. Second, getting interest rates low …
22nd July 2016
The early evidence suggests that businesses and households in Australia have not been ruffled by the UK’s vote to leave the EU and Australia’s close Federal election result. Admittedly, consumer confidence did fall in July. But that decline was small and …
21st July 2016
The Reserve Bank of New Zealand used its unusual inter-meeting “economic update” to all-but guarantee that it will cut rates from 2.25% to 2.00% at the meeting on 11 August and that it wants the dollar to weaken substantially. To achieve the latter, we …
Today’s announcement by the Reserve Bank of New Zealand that it intends to tighten existing loan-to-value restrictions will not only go some way to addressing the risks to financial stability posed by the booming housing market, but will also allow the …
19th July 2016
The weak tone of the CPI inflation data for the second quarter probably means that at Thursday’s unusual inter-meeting economic update the RBNZ will hint that it intends to use tighter lending restrictions to control the housing market and further …
18th July 2016
Most of the rise in the share of people working part-time is due to long-term factors that have improved the flexibility of Australia’s labour market. However, some of it is due to weak economic conditions that are preventing people from working longer. …
15th July 2016
Although the labour market is probably a bit weaker than June’s figures suggest, we’re not too concerned when the forward-looking indicators remain healthy. That said, the high share of part-time employment suggests there is still plenty of spare …
14th July 2016
Much like financial markets and businesses, the Westpac measure of consumer confidence in July suggests that households have been largely unaffected by the significant political uncertainty domestically and abroad in recent weeks. … Australia Consumer …
13th July 2016
The New Zealand dollar may not to be able to defy gravity for much longer as a shrinking interest rate premium could drag it down from US$0.73 now to around US$0.65 by the end of the year. That would mean the kiwi is unlikely to reach parity against the …
12th July 2016
While we doubt that the loss of Australia’s AAA credit rating would be followed by a rise in borrowing costs for the government, states and banks, it would nonetheless highlight that the burden to support the economy and to boost inflation will remain on …
8th July 2016
S&P’s decision to revise Australia’s AAA credit rating from stable to negative is another political blow for the Coalition, but it doesn’t mean much for the financial markets, the States or the banks … Loss of AAA rating wouldn't raise borrowing …
7th July 2016
By leaving interest rates at 1.75% and not providing a very strong hint that they will be cut in August, the Reserve Bank of Australia today implied that the recent financial market volatility and political uncertainty has not altered the economic …
5th July 2016
Weaker-than-expected retail sales and international trade figures for May provide further evidence that GDP growth probably slowed sharply in the second quarter. This won’t be enough to persuade the RBA to cut rates at its policy meeting later today. … …
The fallout on the economy and financial markets from the uncertain outcome of the Federal election will probably be relatively mild and short-lived and is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50% at …
4th July 2016
Although the recent poor performance of equity prices means that household wealth may decline in the first half of the year, we doubt this will significantly restrain consumption growth. Households will probably just dip into their savings or borrow more …
1st July 2016
The unusually low rates of underlying inflation in both Australia and New Zealand will remain a thorn in the side of policymakers for a number of years yet. This explains why we believe that the Reserve Banks of Australia and New Zealand will both cut …
30th June 2016
The recent volatility in global financial markets triggered by the UK’s vote to leave the EU is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50% at its meeting on Tuesday 5th July. However, we still believe that …
29th June 2016
Last week’s vote by the UK to leave the EU isn’t a major threat to the Australian and New Zealand economies, especially when the resulting volatility in the financial markets appears to be fading. … Brexit not a major …
27th June 2016
The surprising lack of an easing bias in the minutes from the Reserve Bank of Australia’s June policy meeting could be interpreted as a signal that interest rates have reached a floor. However, we don’t think that this is the case and still believe that …
24th June 2016
While GDP growth was stronger than expected in Australia and New Zealand in the first quarter, this doesn’t alter our view that underlying inflation will remain low for a while yet. The Australian economy has operated below potential for a few years and …
22nd June 2016
The sharp falls in equity prices in Australia in response to the rise in the chance that the UK may vote to leave the EU seem overdone. A Brexit is unlikely to be a disaster for the global economy. And since Australia sends only 1% of its exports to the …
17th June 2016
May’s data suggest that the labour market is not too strong to prevent the Reserve Bank of Australia from cutting interest rates to 1.5% at its August meeting and not too weak to prompt it to become any more worried about the health of the economy. … …
16th June 2016
The rise in GDP in the first quarter doesn’t make the RBNZ any less likely to cut interest rates to 2.0% at the next policy meeting in August. And we believe that a combination of weaker GDP growth and persistently low inflation will mean that interest …
The rebound in consumer confidence following the RBA’s decision to cut interest rates in May was sustained in June. But since rate cuts tend to boost sentiment for only a couple of months, confidence may fall back before long. Nonetheless, annual …
15th June 2016
If the housing markets in both Australia and New Zealand remain strong, then our forecasts that interest rates will fall to 1.0% in Australia and to 1.75% in New Zealand would look out of reach. However, we suspect that tighter lending standards will take …
10th June 2016
Despite leaving interest rates at 2.25% today, the Reserve Bank of New Zealand still hinted that they may fall to 2.0% before long. What’s more, we still think there’s a chance that rates may have to decline to 1.75%, although not until very late this …
9th June 2016
It was no surprise after cutting interest rates in May that the Reserve Bank of Australia left rates on hold at 1.75% today. But by not sending a signal that rates will fall further, it has become a bit less likely that rates will be reduced to 1.5% in …
7th June 2016
The leap in GDP in Australia in the first quarter doesn’t significantly alter the outlook for underlying inflation, especially if we are right in thinking that economic growth will drop back below the economy’s potential rate later this year. This …
3rd June 2016
April’s international trade and retail sales data suggest that the spectacular rise in GDP in the first quarter is unlikely to be sustained in the second. Despite the narrowing in the trade deficit, net trade will struggle to match the strong …
2nd June 2016
The Reserve Bank of Australia is unlikely to follow May’s 0.25% interest rate cut to 1.75% with another reduction at the meeting on Tuesday 7th June. But we still believe that rates will be reduced to 1.5% at the August meeting and, in a change to our …
The Reserve Bank of New Zealand will almost certainly cut interest rates from 2.25% to 2.00% at its next policy meeting on Thursday 9th June. Although we don’t expect the RBNZ to signal this month that further rate cuts lie ahead, we think that rates will …
The surge in GDP in the first quarter means the RBA won’t be in a rush to cut interest rates again. But growth will slow during the rest of this year and we still think that continued low inflation will prompt the RBA to cut rates to 1.5%, probably in …
1st June 2016
It always seemed unlikely to us that non-mining investment would seamlessly fill the hole left by the plunge in mining investment. This is especially the case when the economy is saddled with a large amount of spare capacity, which means non-mining …
27th May 2016
Although the plunge in real private capital expenditure in the first quarter has led us to revise down our estimate for first-quarter GDP growth, from 0.8% q/q to 0.6%, the survey probably isn’t weak enough to prompt the RBA to follow the rate cut to …
Although GDP growth in Australia in the first quarter probably at least matched the 0.6% q/q rate in the fourth quarter of last year, the continued disappointment is the failure of non-mining investment to fill the hole left by the plunge in mining …
26th May 2016
A US-style collapse in house prices in Australia is unlikely when lending conditions during the good times have not been as loose as in America and Australian banks are better placed to cope with the bad times. Even so, we are more worried than most and …
23rd May 2016
Our forecasts that interest rates in Australia will remain low for longer than the markets expect while rates in the US will rise further than widely believed are consistent with government bonds in Australia outperforming US Treasuries. While Australian …
20th May 2016
Since the labour market remained healthy enough in April, the Reserve Bank of Australia doesn’t need to hit the panic button and cut interest rates again at the next meeting in June. We still think rates are more likely to be reduced to 1.5% at the …
19th May 2016
The decision by the Reserve Bank of Australia to cut interest rates to 1.75% and revise down its inflation forecasts is still causing waves, but what happens next largely depends on the evolution of inflation expectations. Our analysis suggests that …
13th May 2016
