Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
Record slowdown in retail spending The preliminary estimate of a 17.9% m/m fall in retail spending in April marked the steepest decline on record. But that fall overstates the weakness in retail spending. Given retail sales spiked by 8.5% m/m in March, …
22nd May 2020
Unemployment may not rise all that much The 4.6% m/m fall in employment in April was broadly in line with our forecast, but due to an unprecedented slump in the participation rate, the unemployment rate only rose from 5.2% to 6.2%. Over the coming months, …
15th May 2020
Government expects return to normality by July PM Morrison outlined the government’s three-stage plan to restart the economy on Friday. In the first stage, schools will reopen and restaurants and cafes will be able to serve up to 10 people at a time. In …
8th May 2020
Many states starting to lift restrictions With the number of new coronavirus cases across Australia having fallen from nearly 400 per day in late-March to around 15 over the past week, several Australian states have started to ease their lockdowns. …
30th April 2020
Panic buying drives record retail sales Preliminary figures for March show that the economy held up better than we had anticipated last quarter. First, merchandise trade exports values rose by a stellar 23% m/m. Admittedly, the massive rise in exports …
24th April 2020
Labour market data has yet to show virus impact Australia’s labour market data showed that employment actually rose a touch in March. But the survey was conducted in the first half of the month, before the virus started to spread widely in Australia. It’s …
17th April 2020
Australian rating outlook lowered S&P has lowered the Australian credit rating outlook from ‘stable’ to ‘negative’ on the back of rising government debt. S&P has also noted it may officially lower Australia’s AAA within the next two years depending on the …
9th April 2020
New South Wales & Queensland are locked down We predicted last week that Australia will impose a similar lockdown as in New Zealand which would restrict activity to essential services. That hasn’t happened, largely because there’s been a drop in new …
3rd April 2020
New Zealand in Lockdown, Australia on the brink This week New Zealand entered a near-total lockdown in an effort to contain the spread of the coronavirus. The restrictions are more draconian than in most other countries that have imposed lockdowns. …
27th March 2020
Economic outlook grim As measures in place to contain the virus have grown more severe, the economic outlook in Australia has naturally become even bleaker. This week Scott Morrison announced that Australia’s borders are shut to all non-Australians. In …
20th March 2020
Consumption will be weak despite oil price drop The price of Brent crude oil fell sharply from $45 per barrel at the end of last week to US$32 now. We expect prices to gradually recover to around US$48 per barrel by the end of the year. But the key point …
13th March 2020
Economic outlook grim GDP growth slowed a touch to 0.5% q/q in Q4. And with data from January showing signs of weakness even before the impact of the coronavirus, our forecast that GDP contracted by 0.1% in Q1 is now looking optimistic. The trade surplus …
6th March 2020
Mixed bag of data for private investment The capex survey in Q4 provided mixed news for private investment. The survey showed the sharpest fall in real capital expenditure since 2016. Admittedly, the construction work done data, which were also released …
28th February 2020
Unemployment rate jumps to 5.3% The unemployment rate jumped in January from 5.1% at the end of 2019 to 5.3%. And that’s despite the ABS excluding the areas of Australia that were worst hit by the bushfires. It’s possible that the number of unemployed …
21st February 2020
Travel ban extended until February 22 nd The ban on travel from China to Australia was set to end this weekend. But given the continued growth in infections of the coronavirus in China it has now been extended to 22 nd February. That’s not particularly …
14th February 2020
Growth in Q4 set to remain subdued The decline in retail sales in December is consistent with our view that the surge in sales in November was driven by Black Friday discounts. After adjusting for price effects, real retail sales rose by 0.5% in Q4, the …
7th February 2020
Housing costs will boost inflation this year Headline inflation edged higher in Australia from 1.7% in Q3 to 1.8% in Q4. But trimmed mean and weighted median inflation remained stable and core inflation (excluding food and energy) declined from 1.9% to …
31st January 2020
Upbeat labour market may delay rate cut The labour market has remained solid despite subdued economic activity. Employment rose by 28,900 in December, far exceeding analysts’ expectation of a mere 10,000 pick-up. The unemployment rate fell for the second …
24th January 2020
Trade deal not great news for Australia Phase one of the US-China trade deal was signed this week which marks an end to the first phase of the trade war. (See here for detailed coverage.) It removes the downside risk of imminent further escalation which …
17th January 2020
Net trade probably bolstered growth in Q4 External trade data for November released this week showed a sharp improvement in the trade balance supported by a rise in export values while import values declined. The rise in export values is particularly …
10th January 2020
Housing market going from strength to strength With bushfires still roaring across large parts of the country, the economic data are naturally taking a backseat. This week we learned that house price growth slowed from 1.9% m/m in November to 1.4% m/m in …
3rd January 2020
Australia’s labour market broadly stable The minutes of the RBA’s December meeting noted that “it would be important to reassess the economic outlook in February 2020, when the Bank would prepare updated forecasts”. The Board noted that “it would be …
20th December 2019
Business and consumer confidence both drop The survey data released this week support our view that the Australian economy will struggle to gain momentum next year. Business confidence dropped from 2.0 to 0.1 in November and is only fractionally above the …
13th December 2019
Household spending remains the Achilles heel The RBA kept interest rates unchanged at the meeting that occurred one day before the release of the Q3 GDP data and reiterated that the economy had reached a “gentle turning point”. At first glance, the …
6th December 2019
Higher bar for QE will be reached before long In a much-anticipated speech this week Reserve Bank of Australia Governor Lowe laid out the Bank’s thinking around unconventional monetary policy. For the most part, the speech confirmed our existing views. …
29th November 2019
Government stimulus underwhelming The government appear to have had a change of heart with PM Scott Morrison this week promising additional stimulus in the Mid-Year Economic and Fiscal Outlook (MYEFO), which is usually released in mid-December. The …
22nd November 2019
Spare capacity in the labour market to rise We wouldn’t read too much into October’s largest fall in employment in three years. The data are volatile and a renewed rise in November is likely. Even so, the labour market is clearly deteriorating. The …
15th November 2019
GDP growth to remain subdued This week we got a clear indication there has not been a strong rebound in economic growth in the third quarter as policymakers were hoping. Admittedly, before the release of the September trade data we had pencilled in a 0.4 …
8th November 2019
Goods inflation climbs to 10-year high The inflation data released this week were stronger than we had anticipated. Core market services inflation duly weakened from 1.3% to 1.2% as the looser labour market probably restrained wage growth. But core market …
1st November 2019
Australia could have its cake and eat it too The new secretary to the Australian Treasury, Steven Kennedy, has pushed the RBA’s hopes for fiscal stimulus slightly further out of reach by endorsing the government’s current fiscal policy settings. He said …
25th October 2019
Underlying inflation set to weaken further The Reserve Bank of Australia will have breathed a sigh of relief after the unemployment rate dipped from 5.3% to 5.2% in September despite the fact that job growth slowed. And the minutes of the Bank’s October …
18th October 2019
Waning confidence Business and consumer confidence data released this week provided yet another signal that economic activity in Australia is set to remain weak in the coming quarters. Following the May election, business confidence surged, probably …
11th October 2019
Stimulus running into diminishing returns The RBA cut interest rates to 0.75% on Tuesday as most had anticipated. It put more emphasis than usual on its intention to achieve full employment. In June, the Bank revised down its estimate of the unemployment …
4th October 2019
Interest rates cut around the world The Reserve Bank of New Zealand kept interest rates on hold at 1.0% this week following the dramatic 50 basis point cut in August. The decision to leave rates on hold was in line with market expectations and the analyst …
27th September 2019
Close but no cigar This week the government revealed that in the 2018/19 fiscal year the budget remained in deficit. The deficit was just $690 mn, rounding to 0.0% of GDP, much smaller than the $4.2 bn or 0.2% of GDP deficit that was forecast in the April …
20th September 2019
Stimulus will overcome low confidence This week’s consumer confidence and business confidence releases were disappointing as both dropped in the latest reading. (See Chart 1.) At first glance, that’s a worrying sign given the support from the RBA’s tax …
13th September 2019
Tax cuts will have an impact soon enough The 0.5% q/q rise in GDP in the second quarter was stronger than we had anticipated. Admittedly, that strength was partly driven by an outsized 0.6 ppt contribution from net exports. But there was also a 0.5ppt …
6th September 2019
Iron ore price fall ends the party before it starts We estimate that the current account reached a surplus in the second quarter for the first time in more than 40 years. (See Chart 1.) That extraordinary achievement was made possible by the rally in iron …
30th August 2019
Inverted yield curve Investors have had their feathers ruffled by the decline of 10-year government bond yields below 2-year government bonds yields in the US. That inversion of the yield curve is seen by many as a signal of an impending recession. …
23rd August 2019
Strong jobs growth unlikely to last The RBA’s latest Statement on Monetary Policy highlighted the tension between soft income and GDP growth on the one hand and strong employment growth on the other hand. We’ll have to wait until early September to find …
16th August 2019
RBNZ cuts while RBA holds In Australia, the RBA kept rates on hold at 1.0% this week, as widely expected. But the Bank acknowledged that the uncertainty generated by the trade war had increased and noted that it would “ease monetary policy further if …
8th August 2019
Hopes of strong rebound dashed Data released this week provide further evidence that the economy is performing below capacity. Admittedly, house prices appear to be bottoming out. Average house prices in the eight capital cities edged up in July. What’s …
2nd August 2019
Is the inflation target still fit for purpose? Treasurer Josh Frydenburg revealed this week that he is currently reviewing the RBA’s inflation target in preparation to sign the Statement on the Conduct of Monetary Policy, along with Governor Lowe. The …
26th July 2019
Slump in gas prices a major concern Reports this week have suggested that the United States will overtake Australia and Qatar to become the world’s biggest exporter of liquefied natural gas (LNG) by 2024. Gas production has soared in recent years, …
19th July 2019
Don’t hold your breath for a big rebound At the start of the year, we forecast that the housing downturn would weigh on consumption growth and residential construction causing GDP growth to slow much more sharply than the consensus believed. (See here .) …
12th July 2019
RBA reiterates call for fiscal stimulus The RBA cut rates by 25bp to 1.0% on Tuesday. Following the 25bp cut in June, that marked the first time the RBA has delivered back to back rate cuts since 2012. With rates approaching the zero lower bound, Governor …
5th July 2019
Dovish RBNZ As expected, the RBNZ kept the official cash rate on hold at 1.50% this week. But given the Bank’s dovish tone and our downbeat forecasts for New Zealand’s economy, we now think the RBNZ will cut rates twice this year. (See here .) Admittedly, …
28th June 2019