Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The Reserve Bank of New Zealand sounded more optimistic at today’s meeting and signalled that it will start to hike rates in the second half of next year, in line with our long-standing forecast. If anything, the risks are that the Bank tightens policy …
26th May 2021
Treasurer Josh Frydenberg revealed in today’s Budget that the government will spend nearly all of the windfall accruing from the stronger economic recovery. That will result in a permanently larger role of the state and a sizeable structural budget …
11th May 2021
While the government is likely to announce further tax relief at next week’s Budget, we suspect it will use nearly half of the recent improvement in the budget balance to reduce borrowing. Treasurer Josh Frydenberg will announce the Budget on Tuesday, 11 …
5th May 2021
The Reserve Bank of Australia upgraded its forecasts for GDP growth and inflation but reiterated that it is prepared to extend its asset purchases. We stick to our forecast of another $100bn extension in the Bank’s bond purchase program, though this would …
4th May 2021
New Zealand is playing with fire by criticising the human rights situation in China’s Xinjiang province. While China is highly dependent on New Zealand’s flagship dairy, meat and logs exports, it could impose restrictions on smaller product categories. We …
22nd April 2021
New Zealand’s experience suggests that the planned increase in risk-weightings for investor housing loans in Australia won’t act as a big deterrent to bank lending. If investor loan growth started to run hot, the banking regulator would have to respond …
19th April 2021
The Reserve Bank of New Zealand (RBNZ) stuck to its dovish stance when it left policy settings unchanged today, but we still expect the Bank to raise rates towards the end of next year. As expected, the Bank did not adjust its policy rate or its asset …
14th April 2021
The Reserve Bank of Australia stuck to its dovish stance despite the strength in recent data so we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank acknowledged the recent improvement in the global …
6th April 2021
Even if the long-rumoured Australia-New Zealand travel bubble does go ahead, it wouldn’t make a huge difference to either economy. We think the bubble would give a small boost to New Zealand’s GDP and be a small drag on Australia. A travel bubble between …
24th March 2021
Housing finance commitments have surged in recent months pointing to a rise in credit growth before long. But we don’t think lending standards have been eroded so this shouldn’t stop the RBA from announcing an extension to its QE again in June. Household …
17th March 2021
Today’s dovish speech by RBA Governor Lowe supports our view that the RBA is set to keep monetary policy accommodative for a long time to come. But concerns about the functioning of the bond market may force the RBA to stop QE by the end of the year. …
10th March 2021
The slow progress in rolling out vaccines in New Zealand means that its border may only be reopened by the end of this year. With net migration boosting population growth by around 1%-pt per annum before the virus struck, we’ve lowered our forecast for …
8th March 2021
While Australia’s non-iron ore export volumes to China have slumped by 40% over the past year, coal miners have been able to divert their shipments to other countries. The upshot is that the conflict isn’t as damaging to Australia’s economy as many think. …
4th March 2021
The Reserve Bank of Australia today doubled down on its commitment to keep monetary policy settings loose and we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank kept its target for the cash rate and the …
2nd March 2021
We doubt that the Reserve Bank of New Zealand’s new obligation to consider house prices will drastically change the outlook for monetary policy. But given that house price growth remains very strong, there is a risk that the Bank tightens policy earlier …
26th February 2021
The Reserve Bank of New Zealand (RBNZ) sounded dovish when it left policy settings unchanged today, but we still expect the Bank to begin increasing rates next year. As expected, the RBNZ did not adjust the OCR or its asset purchase program at today’s …
24th February 2021
While the exchange rate has strengthened sharply, goods prices are unlikely to fall. That should allow rising services prices to keep underlying inflation stable. Goods inflation rose to its highest rate in nearly 20 years at the end of 2020. One driver …
10th February 2021
With job losses during the pandemic concentrated in a handful of sectors and demand set to rebound as vaccines are rolled out, we think that the unemployment rate will fall to 5.5% by the end of this year. The virus has hit some industries much harder …
8th February 2021
The recent surge in building approvals has largely been driven by the HomeBuilder Grant and probably won’t last. But with home sales soaring and house prices rising, dwellings investment should continue to recover even once HomeBuilder ends. Building …
3rd February 2021
We are more upbeat about the outlook for the economy than the Reserve Bank of Australia. But the RBA seems keen to err on the side of caution. With the latest extension of its QE programme already ending in August, we suspect the Bank will announce one …
The RBA today upgraded its labour market forecasts but noted that the recovery remained dependent on “significant fiscal and monetary support”. Indeed, the Bank extended its Bond Purchase Program by another $100bn and indicated that it won’t raise …
2nd February 2021
Our base case remains that the RBA will end quantitative easing in April. However, one risk to that forecast is the rising share of long-term unemployment. According to estimates by both the RBA and the OECD, the natural rate of unemployment rose after …
25th January 2021
The fact that the government revised up its estimate for the underlying cash balance in 2020/21 by more than 1% of GDP since the October Budget underlines that the economy is recovering much faster than most had anticipated. The government’s GDP growth …
17th December 2020
We think that the recovery from the pandemic will be stronger than most anticipate. That means that the labour market will tighten rapidly, allowing central banks to end their bond purchases. The upshot is that both the Australian dollar and the New …
16th December 2020
The capital ratios of Australian banks may decline a bit as loan deferrals come to an end and other policy support is withdrawn. But with capital ratios having almost doubled since the GFC and underlying profitability sound, the banking sector won’t be a …
10th December 2020
The RBA still sounded cautious when it left policy settings unchanged today. But if our more optimistic forecasts for GDP growth and inflation are realised, the Bank may not decide to expand QE in April. The Bank kept both its cash rate target as well as …
1st December 2020
New Zealand is likely to be one of the few countries where output had recovered to pre-virus levels in Q3. Taken together with the recent positive news on the vaccine, we no longer expect the RBNZ to cut rates into negative territory. New Zealand removed …
30th November 2020
Australia and New Zealand will benefit less than other advanced economies from a vaccine due to their success in containing the virus. Even so, we’ve lifted our 2021 GDP growth forecasts a bit and no longer expect the RBA to expand quantitative easing …
26th November 2020
The Reserve Bank of New Zealand’s (RBNZ) decision to implement a funding for lending programme in December should provide some further stimulus on its own and is another step towards implementing negative rates in 2021. The Bank did not adjust the OCR or …
11th November 2020
While card transaction data have overstated the health of consumer spending in recent years, we suspect they didn’t do so recently. As such, we’re willing to take the jump in transaction amounts in Q3 at face value and have pencilled in a strong rise in …
9th November 2020
The RBA didn’t disappoint when it cut interest rates and launched quantitative easing today. And even though it turned more optimistic about the economic outlook, we suspect it will expand its government bond purchases beyond the planned six months . The …
3rd November 2020
The RBA’s assets will rise further over the coming months as banks draw down funding under the TFF. But so will the assets of other central banks. If the Bank wanted to catch up with the advanced economies’ most expansionary central banks, it would need …
21st October 2020
We estimate that the income tax cuts and other stimulus measures unveiled in today’s Budget will provide fiscal support of around 2.5% of GDP in 2021/22. That won’t prevent a major tightening in fiscal policy as the huge support provided during the …
6th October 2020
The RBA kept policy settings unchanged today but signaled that more stimulus is forthcoming. We now expect the Bank to cut the cash rate target, the 3-year yield target and the interest rate on the term funding facility to 0.1% next month. We suspect the …
The experience from second virus waves in Australia, New Zealand and Japan is that consumer spending falls even if governments don’t impose major restrictions. However, there are three key reasons why second waves may be less damaging to economic activity …
25th September 2020
The Reserve Bank of New Zealand (RBNZ) continued to set the stage for negative rates today and we think the OCR will be cut into negative territory early next year. As expected, the Bank did not adjust the overnight cash rate (OCR) or its asset purchase …
23rd September 2020
Inflation has been close to the midpoint of the RBA’s 2-3% inflation target since its launch in the 1990s, but this has come at the expense of soaring house prices and household debt. Australia’s experience underlines that central banks need better tools …
15th September 2020
Jacinda Ardern’s incumbent Labour party looks set to win a solid victory at New Zealand’s upcoming election. That might keep business confidence subdued, but it probably wouldn’t be as much of a drag on GDP growth as the opposition National Party’s plans …
9th September 2020
Proposals by the banking regulator and the RBA that banks will need to hold more government bonds could be interpreted as financial repression. However, the surge in the outstanding stock of government bonds was always likely to result in higher holdings …
8th September 2020
The RBA today expanded its Term Funding Facility which should contribute to continued strong growth in the money supply. And while it didn’t indicate that additional stimulus is forthcoming, we still expect it to expand its bond purchases before long . As …
1st September 2020
The surge in corporate profits in Q2 happened despite a large drop in sales and mostly reflects the impact of the JobKeeper wage subsidy. With that subsidy being scaled back, corporate profits should come off the boil and business investment will continue …
31st August 2020
Negative interest rates would not necessarily weaken the exchange rate, but they would almost certainly reduce bank lending rates. While they could result in lower lending margins, New Zealand’s banks are well capitalised and are among the most profitable …
20th August 2020
The Reserve Bank of New Zealand (RBNZ) further expanded its quantitative easing programme at today’s meeting and we think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated by all …
12th August 2020
We predicted four months ago that Australian house prices would fall by 5-10% from their peak. The short-lived nature of the recent downturn and the fact that affordability is looking increasingly attractive means that forecast is still looking good. …
4th August 2020
The RBA turned more pessimistic about the outlook for the economy when it kept policy settings unchanged today and we think it will engage in additional asset purchases before long . As widely anticipated, the RBA kept both its cash rate as well as the …
The additional restrictions on activity imposed in Victoria this week to curb the renewed surge in virus cases will cause the recovery in output to slow markedly in Q3. The number of virus cases in Victoria continues to surge, with new daily cases …
3rd August 2020
Today’s fiscal update was a damp squib as the Treasurer didn’t present fiscal forecasts beyond June 2021 and didn’t unveil fresh fiscal support. While the government’s current forecasts are very close to our own, policymakers will probably unveil …
23rd July 2020
The government will extend the JobKeeper wage subsidy by six months. Unemployment benefits will be made less generous which should encourage many of those having dropped out of the labour force to seek a job. Even so, the JobKeeper extension supports our …
21st July 2020
The RBA sounded more optimistic when it left policy settings unchanged today. But with the recovery set to remain bumpy and inflation likely to weaken more sharply than the Bank is anticipating, we still expect the Bank to resume its bond purchases before …
7th July 2020
Online sales surged during the lockdown and rose further even as the Australian and New Zealand economies were opening up again. We suspect online sales will remain high which means measures of physical location may understate the resilience of …
6th July 2020