Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The rebound in the Westpac measure of consumer confidence in May appears to be a result of the RBA’s decision to cut interest rates last week, but history suggests this support may only be temporary. … Australia Consumer Confidence …
11th May 2016
Our success in forecasting ahead of everyone else that the Reserve Bank of Australia would cut interest rates below 2% is mainly because we realised that the legacy of a prolonged period of below potential growth would drag down underlying inflation. That …
6th May 2016
The Reserve Bank of Australia’s new forecast that underlying inflation will remain below the 2-3% target range until mid-2018 supports our view that interest rates will soon be cut by a further 0.25% to our long-held forecast of 1.5%. Governor-in-waiting …
March’s international trade and retail sales data suggest that a boost to GDP growth from net trade probably more than offset an easing in consumption growth in the first quarter. We estimate that real GDP growth accelerated from the fourth quarter’s 0.6% …
5th May 2016
The sharper-than-expected rise in the unemployment rate in the first quarter reversed half of the large decline at the end of last year and suggests that the previous improvement was more a mirage than a miracle. Given that wage growth also remained …
4th May 2016
While the Budget has been badged as focusing on “jobs and growth”, Treasurer Scott Morrison was clearly thinking about his own job and the probable Federal election on 2nd July when he crafted it. Morrison managed to give some money away before the …
3rd May 2016
Today’s decision by the Reserve Bank of Australia to cut interest rates from 2.0% to 1.75% will help solve the economy’s twin problems of too slow growth and too low underlying inflation. It also vindicates our decision to forecast that rates would fall …
Treasurer Scott Morrison will put Australia’s AAA credit rating at risk in Tuesday’s Federal Budget by revealing a net rise in spending in an attempt to gain favour ahead of the probable election on 2nd July. Even if this gamble pays off in the near-term, …
29th April 2016
The recent strength of both the Australian and New Zealand dollars means that interest rates will have to fall further than widely expected to solve the twin problems of too slow economic growth and too low underlying inflation. Our forecasts that GDP …
28th April 2016
We don’t believe that the slightly more positive tone of the policy statement released after the Reserve Bank of New Zealand left interest rates on hold at 2.25% today will prevent the Bank from cutting rates to 2.0% at the meeting in June. What’s more, …
We suspect that news of the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia to cut interest rates from 2.00% to 1.75% at its policy meeting on Tuesday 3rd May. But even if the Bank keeps rates …
27th April 2016
The sharp fall in underlying inflation to 1.5% in the first quarter is a game-changer for the Reserve Bank of Australia and supports our long-held view that interest rates will fall from 2.0% now to 1.5%. Rates may even be reduced to 1.75% at next …
The idea that households and businesses postpone their spending ahead of a Federal election is more fallacy than fact. Admittedly, there is some evidence that the uncertainty generated by an election leads businesses to reduce their investment …
22nd April 2016
We expect the Reserve Bank of New Zealand to cut interest rates by 0.25% to 2.00% at the meeting in early June rather than at the meeting on Thursday 28th April, although we wouldn’t completely rule out a cut next week. Either way, in a change to our …
21st April 2016
The recent rise of the Australian and New Zealand dollars will prevent GDP growth from strengthening this year and will keep core inflation at uncomfortably low levels. This is particularly true in Australia, where the dollar has reached a 10-month high …
20th April 2016
The rebound in CPI inflation in the first quarter increases the chances that the RBNZ won’t cut interest rates to 2.0% at next week’s policy meeting and will instead wait until the meeting in June. By then the RBNZ will know whether or not the rise in …
18th April 2016
Since the sharp declines in inflation expectations were the main reason why the Reserve Bank of New Zealand cut interest rates to 2.25% in March, future moves in inflation expectations will have a big bearing on whether or not rates eventually fall below …
15th April 2016
The 26,100 rebound in employment in March is something of a relief given the stagnation in the previous three months. With the unemployment rate falling from 5.8% to 5.7%, the labour market appears in reasonable shape. … Australia Labour Market …
14th April 2016
The further fall in the Westpac measure of consumer confidence in April suggests that the apparent weakness in consumption growth in the first quarter may continue into the second. It also hints that the recent slowing in employment growth may be the …
13th April 2016
While exports of services will continue to grow rapidly over the next decade, they won’t boost GDP by anywhere near as much as resources exports have. For that to happen, countries such as China and India would need to develop at a blistering pace and …
The Reserve Bank of Australia should be applauded for resuming its attempts to talk down the dollar as the evolution of the currency will have a crucial influence on the outlook for both economic growth and underlying inflation. It’s even more important …
8th April 2016
We were right to suggest that, while leaving interest rates on hold at 2.0% today, the Reserve Bank of Australia would use the policy statement to try to talk the dollar down. Whether or not this will work is another matter. In the financial markets, …
5th April 2016
The unexpected widening in the international trade deficit in February and revisions to past data suggest that GDP growth may have slowed sharply in the first quarter. This makes it more important for the RBA to do try and reverse the recent strengthening …
Although February’s building approvals data were broadly in line with expectations, retail sales were much weaker than expected and suggest that real consumption growth may have slowed notably in the first quarter of the year. This is unlikely to prompt …
4th April 2016
We can’t rule it out completely, but recent suggestions that Australia is the second most likely country in the world to suffer a debt crisis and recession in the next one to three years seem overblown. The level of household debt isn’t as high as it …
1st April 2016
While the Reserve Bank of Australia will almost certainly leave interest rates at 2.0% at the policy meeting on Tuesday 5th April, it may try to give activity and inflation a boost by attempting to talk down the Australian dollar. In any case, we believe …
30th March 2016
The resurgence in Australia’s housing market at the start of this year is already looking a bit tired. The delayed impact on activity from last year’s rises in mortgage rates, the recent deterioration in sentiment towards housing and the overhang of …
24th March 2016
More worrying than the 0.5% q/q seasonally adjusted fall in the ABS measure of Australian house prices in the fourth quarter of last year (+0.2% q/q unadjusted) is that the subsequent rebound is already running out of steam. After rising by an impressive …
22nd March 2016
There is not enough evidence to conclude that the recent sharp slowdown in employment growth in Australia is due to fears over the health of the global economy rather than statistical noise. This year’s Census and probable Federal Election will mean that …
18th March 2016
The recent stagnation in employment is probably just payback from the unjustified strength late last year rather than a sign that fears over the global economy have prompted businesses to postpone hiring. When taken together with the fall back in the …
17th March 2016
The surprisingly strong rise in GDP in the fourth quarter of last year won’t prevent the RBNZ from cutting interest rates from 2.25% to 2.00% in the coming months, although it does make it a little less likely that rates will fall below 2.00%. … New …
The recent interest rate cut in New Zealand and the dovish comments by the RBNZ now mean it is easy to imagine a scenario where interest rates in New Zealand fall below those in Australia. That would result in the New Zealand dollar weakening further …
11th March 2016
Today’s 0.25% cut in interest rates in New Zealand, to 2.25% from 2.50%, will have been a surprise to most analysts and the financial markets. But as early as July last year we forecast that rates would be cut to 2.0% this year and in the RBNZ Watch we …
10th March 2016
The relatively small fall in the Westpac measure of consumer confidence in March should be considered a fairly good result when set against the extent of the weakness in the financial markets earlier in the year. With the markets and commodity prices now …
9th March 2016
The strengthening in the Australian dollar to an eight-month high of US$0.74 has left it at a level that poses a serious threat to the economic outlook. This may prompt the RBA to resume its campaign to talk the dollar down and, if that fails, force it to …
7th March 2016
Even though it has faced a very testing set of circumstances, Australia has continued to outperform most of its peers and hasn’t done too bad by its own standards either. A lot of the credit needs to go to households, who picked up the baton of growth …
4th March 2016
Retail sales in January were slightly weaker than expected and suggest that consumption growth may have softened at the start of the year. Nonetheless, there is little evidence that the turmoil in financial markets is prompting households to keep their …
Although we suspect that the Reserve Bank of New Zealand will want to keep its powder dry for a little longer, there’s a real chance it will surprise the markets and cut interest rates by 0.25% at the policy meeting on Thursday 10th March. If it does …
3rd March 2016
The unexpectedly large narrowing in the international trade deficit in January suggests that the resurgence in the Australian economy in the second half of last year may have continued at the start of the year. … Australia International Trade …
The news that the economy grew by 0.6% q/q late last year will reassure the RBA that it has been right to resist calls to cut interest rates further. That said, it might not be long before the RBA becomes concerned about the outlook for growth this year. …
2nd March 2016
The Reserve Bank of Australia today once again decided to leave interest rates at 2.0%, but we don’t think it will be long before a weakening in the economic outlook and a further fall in underlying inflation forces it to cut rates to 1.5%. When other …
1st March 2016
While it is a bit dramatic to suggest that a global currency war is underway, the falls in interest rate expectations in overseas markets relative to those at home explains why the Australian dollar has strengthened to a six-week high of US$0.72. The RBA …
26th February 2016
Although the fourth quarter Australia private capital expenditure data were stronger than expected, the disappointing estimates of future capital expenditure will be concerning for the Reserve Bank of Australia. … Australia Private Capital Expenditure …
25th February 2016
The turmoil in financial markets, the stagnation in employment growth and the recent rises in bank lending rates to businesses are unlikely to have spooked the Reserve Bank of Australia by enough to prompt it to cut interest rates at the policy meeting on …
24th February 2016
The slump in equity prices since the turn of the year is unlikely to be followed by a similar slump in economic growth in Australia, especially now that equity prices are rebounding. Over the past 20 years the equity market has been a poor predictor of …
23rd February 2016
With equity prices still more than 10% below last year’s highs, employment having contracted for two months in a row and leading economic indices slumping, a visitor from Mars would be forgiven for thinking that the Australian economy is in recession. The …
19th February 2016
The further fall in employment in January is probably just a continuation of the data moving back to reality after the unbelievable strength late last year rather than a sign that the concerns over the global economy are giving Australian employers the …
18th February 2016
The resilience of both business and consumer confidence in Australia suggests that the latest sharp falls in equity prices are unlikely to lead to much weaker investment or consumption. This is mainly because the large drop in petrol prices has left …
12th February 2016
The rise in the Westpac measure of consumer confidence in February is particularly impressive given how far equity prices have fallen. It suggests that the strong labour market and fall in petrol prices is allowing households to shrug off the woes of the …
10th February 2016
Our full analysis of the prospects for the Australian and New Zealand economies is contained in our Australia & New Zealand Economic Outlook (sent to clients on 27th January), but in this note we highlight our most important non-consensus calls and …
