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RBA to keep hiking by 25bp in June The 0.7% q/q rise in the wage price index in Q1 was a little weaker than we had anticipated and left the annual rate at a sluggish 2.4%. Digging a little deeper though, it’s clear that wage growth is set to accelerate …
20th May 2022
With inflation set to surpass 6% later this year, we expect real household disposable income to fall at the fastest pace since the early 1990s recession. (See here .) In response, Labor leader Albanese this week suggested that the minimum wage should be …
13th May 2022
RBA starts the climb The RBA finally came around to our long-held view that rate hikes would be needed in the first half of this year and hiked rates at the meeting on Tuesday. Admittedly, we had expected the Bank to hike by 15bp, bringing rates back to …
6th May 2022
Inflation now surging in Australia The 2.1%q/q rise in headline inflation and the 1.4% rise in trimmed mean inflation in Australia in Q1 were much stronger than the RBA was forecasting. Admittedly, the strength in inflation has been largely driven by …
29th April 2022
RBA bringing forward rate hikes The Reserve Bank of Australia is increasingly coming around to our view that rate hikes will be needed before long. The minutes of the RBA’s April meeting revealed that the Bank is becoming concerned about the second-round …
22nd April 2022
Labour market tightening, inflation surging The Reserve Bank of New Zealand’s 50bp rate hike on Wednesday was in line with our forecast and financial market pricing, but defied the analyst consensus of a 25bp hike. We’ve pencilled in another 50bp hike in …
14th April 2022
Strong inflation to trump sluggish wage growth When we predicted two months ago that the RBA would start to hike rates in June, we were among a small minority of analysts holding that view. But with the RBA this week signalling that it will no longer be …
8th April 2022
Economy sails through Omicron The 1.8% m/m rise in Australia’s retail sales in February marked the second consecutive increase and underlines that spending remained resilient throughout the Omicron wave. And with sales at cafés and restaurants hitting a …
1st April 2022
Inflation picking up even further NAB’s February business survey had already highlighted that purchase costs were rising at a rate consistent with a further pick-up in underlying inflation. And the flash PMIs for March, released this week, provide further …
25th March 2022
Soaring petrol prices worrying politicians With petrol prices hitting a record high above 3 NZ$ per litre, the New Zealand government this week slashed the excise tax on fuel by 25 cents per litre for 3 months. That’s roughly one-third of the excise that …
18th March 2022
Governor becoming worried about inflation RBA Governor Philip Lowe reiterated in a speech this week that the Bank can afford to be patient as Australian inflation is not as high as in other countries. However, the Governor highlighted that the surge in …
11th March 2022
GDP will return to pre-virus trend by mid-year The 3.4% q/q rise in Q4 GDP left output just 1.4% below its pre-virus trend, but the recovery remains very lopsided. GDP outside the heaviest-hit sectors has risen by 4.5% since Q4 2019 even as output in …
4th March 2022
Soaring energy prices not a big drag on Australia The conflict in Ukraine is likely to keep commodity prices elevated in the near term. But in a worst-case scenario, the price of Brent crude oil could settle at US$120-140bbl for three to six months. And …
25th February 2022
No budget repair before interest rates rise Treasury Secretary Steven Kennedy used his opening statement to the Senate Economics Committee this week to argue that fiscal policy should remain accommodative until interest rates have been normalised. …
18th February 2022
Domestic tourism set to recover The conventional wisdom is that the complete reopening of the border from 21 st February will weigh on Australia’s economic activity. After all, in 2019 Australian tourists spent around $6bn (1% of GDP) more abroad than …
11th February 2022
Governor Lowe coming around to rate hikes It’s striking that just six months ago RBA Governor Lowe stated that he couldn’t understand why markets were expecting rate hikes in 2022 or early 2023. But this week the Governor announced the RBA would end its …
4th February 2022
Underlying inflation set to surpass 3% The 1.0% q/q rise in trimmed mean consumer prices in Q4 was the largest since 2008 and lifted the annual rate to 2.6%. That marked the first time since 2014 that the RBA’s preferred measure of underlying inflation …
28th January 2022
Labour market tightest since 2008 The 64,800 rise in Australian employment in December meant that the unemployment rate fell from 4.6% to 4.2%, the lowest rate since 2008. RBA Governor Lowe noted last year that if the economic data exceeded the Bank’s …
21st January 2022
Economy running hot before Omicron The economic data released this week corroborates our view that GDP surpassed its pre-lockdown level in Q4. For one thing, retail sales values jumped by 7.3% m/m in November and were 6% above their previous peak a year …
14th January 2022
Omicron probably won’t trigger lockdown In recent weeks new Covid-19 cases have been exploding. More people have tested positive in the past two weeks than in the rest of the pandemic combined. While a lower share of Omicron patients suffer severe …
7th January 2022
The end is coming for QE In a speech this week, RBA Governor Lowe noted that the RBA’s central forecasts were consistent with the Bank tapering its bond purchase programme in February, and ending it altogether in May. But he also acknowledged two other …
17th December 2021
Treasurer Josh Frydenberg will be giving himself a pat on the back when he presents the Mid-Year Economic and Fiscal Outlook (MYEFO) on Thursday. After all, the federal underlying cash balance was $8bn smaller in the four months to October than predicted …
10th December 2021
A week ago we argued that the reopening of the border was unlikely to ease labour shortages much. Indeed, the government has now delayed the re-entry of the 235,000 visa holders stuck overseas until mid-December to ward off the Omicron variant. However, …
3rd December 2021
The reopening of the international border took centre stage this week. With 92% of the eligible population having received their first jab, New Zealand has now fully abandoned its Zero-Covid strategy and intends to reopen the border by April 2022. …
26th November 2021
RBA still a long way from raising rates RBA Governor Phillip Lowe pushed back once again this week on financial market expectations of a hike in the cash rate in 2022. Lowe reiterated that the economy would need to perform very differently from the RBA’s …
19th November 2021
Surveys point to strong inflation persisting The easing of Covid-restrictions and the reopening in New South Wales and Victoria in October prompted a lift in business confidence in the latest NAB business survey. Business confidence rebounded from 9.6 to …
12th November 2021
RBNZ to hike by 50bp later this month The sharp decline in New Zealand’s unemployment rate last quarter came despite the strict lockdown implemented in Q3. What’s more, most measures of labour market slack included in the RBNZ labour market suite showed a …
5th November 2021
RBA throws in the towel With retail sales rebounding even before lockdowns ended and nearly 90% of the population now fully vaccinated, our previous forecast that consumption will rebound by just 3.5% q/q in Q4 following a 10% q/q plunge in Q3 is no …
29th October 2021
Surging inflation puts pressure on RBNZ The 2.2% q/q rise in New Zealand’s consumer prices was the strongest since 2011 and well above the RBNZ’s forecast of a 1.4% increase. In fact, the quarterly increase was enough to meet the RBNZ’s 1-3% annual …
22nd October 2021
Doubling migration would rebuild the population The fresh New South Wales premier Dominic Perrottet has received advice that Australia should double its pre-virus level of migration to offset the recent weakness in population growth. The border closure …
15th October 2021
The RBNZ hiked rates by 25bp this week even as the RBA still sounded dovish. The near-term outlook for both economies is similar. Both are emerging from prolonged lockdowns with around 80% of the eligible population having received one jab and more than …
8th October 2021
Rising living costs will eventually worry RBA We brought forward our forecast for the Bank of England’s first rate hike from 2023 to 2022 last week as second-round effects of higher commodity prices have started to emerge. A similar story is unfolding in …
1st October 2021
Rising house prices threaten financial stability The 17.4% annual rise in house prices in August was the strongest in nearly two decades and prices are set to rise the most since the 1980s by year-end. A speech by RBA Assistant Governor Bullock this week …
24th September 2021
Solid GDP consistent with October rate hike The 2.8% rise in New Zealand’s production GDP in Q2 nearly returned output to its pre-virus trend. That’s an incredible achievement given the slump in net migration and that foreign tourists were just 14% of …
17th September 2021
New South Wales poised to reopen in October This week New South Wales (NSW) Premier Gladys Berejiklian laid out her plan for the state to begin to ease Covid-19 restrictions. We already knew that reopening would hinge on 70% of the adult population …
10th September 2021
Delta undefeatable in Australia Victoria joined New South Wales (NSW) in abandoning the zero-Covid strategy this week, declaring the Delta Variant ‘undefeatable’. Even so, the state government opted not to meaningfully ease restrictions. Instead, the …
3rd September 2021
NSW easing a damb squib Yesterday’s announcement by New South Wales (NSW) that it will ease restrictions for fully vaccinated people was disappointing. Sydney residents in areas under a curfew will be allowed to have a picnic from mid-September, but that …
27th August 2021
Lockdown upends RBNZ’s plans In contrast to what most had expected, the RBNZ didn’t become the first central bank in an advanced economy to hike interest rates after the pandemic at Wednesday’s meeting. The statement made it clear that the Bank was keen …
20th August 2021
Lockdowns multiply The outbreak of the delta variant in Australia continues to worsen. Daily cases reached a new high in New South Wales (NSW) this week. And the re-emergence of cases in Victoria, Queensland and ACT has forced each state to re-enter …
13th August 2021
New Zealand economy running hot New Zealand’s unemployment rate plunged from 4.6% to 4.0% in Q2, matching its pre-virus low. By contrast, the RBNZ had expected the unemployment rate to remain at 4.7% for more than a year. And unlike in Q1, other …
6th August 2021
GDP to contract, but recession unlikely As new infections in Sydney have hit fresh highs this week, the lockdown there has been extended until end-August. The blanket ban on construction has been lifted, but construction will remain banned in hotspots. …
30th July 2021
RBA to delay tapering until November With New South Wales today declaring a “national emergency” as virus cases continue to rise, we now expect the Reserve Bank of Australia to reverse the tapering of its bond purchases and leave them unchanged at least …
23rd July 2021
RBNZ will hike rates next month We forecast at the end of last year that the RBNZ would end its asset purchase scheme by the middle of this year, one year ahead of schedule. While we had expected the Bank to wait until August, the Bank announced this week …
16th July 2021
RBA starts to taper RBA Governor Phillip Lowe has had a hectic week, with two speeches and the RBA’s July Policy decision. While the Governor reiterated that the RBA still believes policy support is likely to be needed for a long time, the stance of …
9th July 2021
Vacancies off the chart The Australian Bureau of Statistics’ measure of job vacancies surged 23.4% in Q2 which means they are now more than 50% above their pre-virus level. Job vacancies are now equivalent to 2.62% of the labour force, far higher than the …
2nd July 2021
Will vaccine supply hit a snag? The worsening outbreak of the delta variant in Sydney underlines that with just 4% of its population fully vaccinated, Australia isn’t out of the woods just yet. The vaccine campaign has accelerated in recent months, but …
25th June 2021
Hawkish moves When RBA Governor Lowe stood up to give a speech on Thursday, markets were still digesting the hawkish shift from the US Fed that had come just a few hours before. The Fed’s move to add two rate hikes in 2023 to its projection took it ahead …
18th June 2021
Victorian lockdown lifted The two-week lockdown in Victoria has now been lifted, two weeks earlier than we had expected. While social distancing restrictions will remain in place, consumers can now shop again, which will provide a meaningful boost to …
11th June 2021
Remarkable GDP bounce back The 1.8% rise in GDP in Q1 was much stronger than most had anticipated and more than enough to lift output to an all-time high. Indeed, with GDP now 0.8% above its pre-virus peak, Australia has been the best performing OECD …
4th June 2021
Investment rebound offset by lockdown The whopping 9.1% rise in machinery and equipment investment in the private capital expenditure survey was more than enough to offset the small decline in non-residential construction in the building works done data. …
28th May 2021