Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Even though the Reserve Bank of Australia (RBA) decided to leave interest rates on hold at 2.0% for the second month in a row today and did not provide a clear hint that more cuts lie ahead, we still think that a further weakening in the outlook will …
7th July 2015
Since most of the recent sharp widening in Australia’s trade deficit is because commodity prices have reduced export values rather than due to outright falls in export volumes, net trade probably still made a positive contribution to real GDP growth in …
3rd July 2015
The Australian economy would be largely untouched even if the current problems in Europe culminated in a widespread financial crisis and another euro-zone recession. That said, if the Reserve Bank of Australia finds itself debating whether or not to cut …
2nd July 2015
The mixed tone of the data released since the Reserve Bank of Australia’s (RBA) last policy meeting probably isn’t enough to spur the Bank to cut interest rates from 2.0% at the meeting scheduled for Tuesday 7 th July. The wildcard is the crisis in the …
1st July 2015
The Australian labour market appears to be coping surprisingly well with the end of the mining boom. However, we suspect that the recent data overstate the strength of the labour market. Moreover, if the economy slows sharply this year, as we expect, then …
26th June 2015
While consumption growth in Australia held up well in the first quarter, there is little chance that an increase in household spending will prevent the economy from slowing. Employment and wage growth look set to weaken in the second half of the year, …
25th June 2015
The Reserve Bank of Australia’s (RBA) repeated statements that it is still open to further rate cuts, depending on the incoming data, have not changed the view of some that 2.0% marks the floor for rates in Australia. But we remain confident that rates …
19th June 2015
The sharp slowdown in New Zealand's economy in the first quarter was partly down to the temporary impact of a drought on the agricultural sector, but there are a number of other factors that will keep growth weak during the rest of the year. … New …
18th June 2015
Policymakers and the markets are too complacent in thinking that the slowdowns in GDP growth in both Australia and New Zealand will be modest and short-lived. In contrast, we believe that growth in Australia will slow sharply from 2.7% last year to 2.0% …
16th June 2015
The decision by the Reserve Bank of New Zealand (RBNZ) to cut rates to 3.25% leaves our prediction that rates will be 3.0% by the end of the year on track and has helped achieve one of our other forecasts, namely a weakening in the New Zealand dollar to …
12th June 2015
While today's interest rate cut by the Reserve Bank of New Zealand (RBNZ), to 3.25% from 3.50%, came a bit earlier than we expected, towards the start of the year we were one of the few analysts expecting rates to fall at all. A further cut in rates to …
11th June 2015
The 42,000 gain in Australian employment in May will no doubt add to claims that Australia’s economy has weathered the end of the mining boom well. However, the reading almost certainly exaggerates the strength of the labour market, while the sharp drop …
While the Australian economy may have shot out of blocks at the start of the year, there are good reasons to think that it will soon run out of puff. Indeed, April’s data suggest that the boosts to activity from the fall in oil prices and the surge in …
5th June 2015
We expect that the Reserve Bank of New Zealand (RBNZ) will use the policy meeting scheduled for Thursday 11 th June and the publication of the accompanying Monetary Policy Statement to further prepare the ground for a rate cut in either July or September. …
4th June 2015
Australia's economy grew at a very healthy rate in the first quarter, which will probably prompt some suggestions that it has weathered last year's fall in commodity prices well. We think the worst is still to come. The end of the mining investment boom …
3rd June 2015
We suspect that today’s decision by the Reserve Bank of Australia (RBA) to leave interest rates on hold at 2.0% is nothing more than a pause in the loosening cycle that could yet result in rates falling to 1.5% by the end of the year. Such a move would …
2nd June 2015
It is possible that at some point in the next couple of years, Australia will lose its AAA credit rating. While this would be a huge blow for whichever political party is in power at the time, it wouldn’t be a big deal for the economy or the financial …
29th May 2015
While the Reserve Bank of Australia (RBA) is highly likely to leave interest rates on hold at 2.0% at its policy meeting on Tuesday 2 nd June, we think it will cut rates further later this year. Our forecast that rates will be reduced by 0.25% at the …
26th May 2015
The bounce in consumer confidence in Australia triggered by the Budget will probably be temporary and won’t prompt households to flock to the shops. Even a Budget-related increase in business confidence is unlikely to translate into faster investment and …
22nd May 2015
The recent divergence of the Australian and New Zealand dollars has been driven by swings in relative interest rate expectations, but we doubt it will be sustained. (See Chart below.) We think the markets are right to start pricing in rate cuts in New …
21st May 2015
The Reserve Bank of Australia and the Treasurer appear to be playing tennis with the economy. RBA Governor Stevens has already cut interest rates to 2.0% and hinted that he would like fiscal policy to provide more help. In last week’s Budget, Treasurer …
15th May 2015
The Reserve Bank of New Zealand’s (RBNZ) plan to tighten its macro-prudential polices in order to tame house price inflation in Auckland could be another sign that it is preparing the ground for a rate cut. As such, it supports our view that interest …
13th May 2015
The 2015-16 Budget will quash any talk of a credit rating downgrade, but won’t give the economy a much-needed helping hand. The decision by Treasurer Joe Hockey not reduce the coming fiscal squeeze increases the pressure on the Reserve Bank of Australia …
12th May 2015
Last week’s news that the unemployment rate in New Zealand is not falling as widely expected and is rising as we thought it might has added to the pressure on the Reserve Bank of New Zealand (RBNZ) to follow its Australian counterpart in cutting interest …
8th May 2015
While Tuesday’s Federal Budget may well live up to the “dull” label slapped on it by the Prime Minister, the failure to provide any extra support to the economy will be disappointing. This would place an even greater burden on the Reserve Bank of …
7th May 2015
The 2,900 drop in Australian employment in April brought to an end a strong run for the country's labour market and pushed up the unemployment rate. Although we would be wary of reading too much into monthly changes in such a volatile data series, we do …
The cut in interest rates to a new record low of 2.00%, from 2.25%, announced by the Reserve Bank of Australia (RBA) today is unlikely to be the last in this cycle. Our forecast that both GDP growth and underlying inflation will be weaker this year than …
5th May 2015
The Reserve Bank of Australia can’t have its cake and eat it. The only way to ensure that the Australian dollar weakens, which would support the real economy, is to reduce interest rates further, but this would boost the already hot housing market. We …
1st May 2015
Although the Reserve Bank of New Zealand (RBNZ) once again left interest rates unchanged today, theshift from a neutral policy bias to an implicit loosening bias supports our view that interest rates willbe cut from the current 3.5% to 3.0% by the end of …
30th April 2015
The recent stronger-than-expected data means that a cut in interest rates at the Reserve Bank of Australia’s (RBA) policy meeting on Tuesday 5 th May is no longer a done deal. But we still think the chances of a cut, to 2.00% from 2.25%, are greater than …
28th April 2015
While we agree that the Reserve Bank of Australia (RBA) is right to conclude that monetary policy is less effective now than before the global financial crisis, we disagree with suggestions that this means there's little point in cutting interest rates …
24th April 2015
The stability of the various measures of underlying inflation in the first quarter suggest that price pressures aren't as weak as we thought. Nonetheless, this is unlikely to prompt the Reserve Bank of Australia to abandon its plans to cut interest rates …
22nd April 2015
The Australian economy appears to have shot out of the blocks at the start of the year. It's possible that it grew by about 1.0% q/q in the first quarter, which would be twice as fast as the rate seen late last year. Retail sales growth has accelerated, …
21st April 2015
The petrol-related plunge in headline CPI inflation, to a 15-year low of 0.1% in the first quarter from 0.8% in the fourth quarter, will grab all the headlines, but it is the weakness of underlying inflation that will influence the future path of policy. …
20th April 2015
We expect the consumer price data for the first quarter to show that headline inflation fell to 1% in Australia and to almost zero in New Zealand. Since these falls are due to the one-off effects of the drop in petrol prices, they won’t permanently reduce …
17th April 2015
Australian employment rose by 37,700 in March, adding to signs that the economy has made a reasonably healthy start to the year. However, we doubt this will last for long. With GDP growth set to slow during the rest of the year, we still expect the …
16th April 2015
The apparent acceleration in consumption growth in the first quarter will boost hopes that, despite the end of the mining boom, the Australian economy will avoid a sharp slowdown. Unfortunately, the recent improvement in consumption growth probably has …
10th April 2015
While a strengthening of the New Zealand dollar to parity against its Australian counterpart would be an important milestone, it would have little adverse economic impact. Indeed, the recent weakening in the trade-weighted index will provide a welcome …
9th April 2015
By deciding not to cut interest rates today from the current level of 2.25%, the Reserve Bank of Australia missed an opportunity to achieve the further weakening in the Australian dollar that it so badly craves. That said, if we are right in thinking that …
8th April 2015
While it is certainly not good news, a fall in the iron ore price to US$50 a tonne or below is neither here nor there when compared with the drop from $US130 to $US70 last year. What’s more, the full effect on the revenues of Australia’s iron ore …
3rd April 2015
Although China’s PMI is a relatively poor indicator of the near-term outlook for Australia’s exports, it does tell us how demand in China is influencing the prices of Australia’s key commodity exports. At current levels, the PMI supports our view that the …
1st April 2015
Regardless of whether the Reserve Bank of Australia (RBA) cuts interest rates from the current rate of 2.25% to 2.00% at the April or May policy meeting (we slightly favour a move at the meeting on Tuesday 7 th April), the main point is that this is …
While some of the latest data have suggested that economic activity in Australia has accelerated since the turn of the year, the bigger picture is that the economy is still struggling to cope with the end of the mining boom. Weaker than expected capital …
25th March 2015
The outlook for New Zealand remains stronger than the prognosis for Australia. Nonetheless, the 3.0% rise in GDP in New Zealand last year will mark the peak of the current cycle. We expect that the delayed hit from the fall in dairy prices and the …
23rd March 2015
New Zealand ended last year on a strong note, but the details of the GDP release for the fourth quarter support our view that this year will be a very different story. We expect growth to slow from 3.0% last year to around 2.3% in 2015. … New Zealand …
19th March 2015
Any rise in government bond yields in Australia and New Zealand triggered by the US Fed taking a step closer to raising rates is likely to be temporary, while any weakening in the exchange rates of both economies will probably be sustained. As such, the …
17th March 2015
The hit to New Zealand’s exports from the economic slowdown in Australia is going to be felt at almost the exact same time as the boost to activity from the domestic construction boom starts to fade. These two factors will contribute to an easing in GDP …
13th March 2015
12th March 2015
The 15,600 increase in Australian employment and slight fall in the unemployment rate last month may be seen by some commentators as a cause for relief. But the bigger picture is that Australia’s economy is struggling to create jobs, and we still expect …
The Reserve Bank of New Zealand (RBNZ) is odds on to buck the recent global trend by leaving its cash rate on hold at 3.5% in the announcement scheduled for Thursday 12th March. But if we are right in expecting both GDP growth and inflation to fall short …
9th March 2015
