Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
We estimate that the revenues of firms in most sectors were still too low in mid-June to generate profits. If those conditions persisted, nearly one-third of firms would run out of cash by the end of Q3. However, revenue should recover over coming months …
25th June 2020
The Reserve Bank of New Zealand (RBNZ) sounded fairly balanced when it left policy settings unchanged today. But we still think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated …
24th June 2020
Consumer spending is bouncing back more strongly than we had anticipated. However, that partly reflects pent-up demand and the strong support from government initiatives. Employment income has slumped and we only expect spending to return to pre-virus …
22nd June 2020
The rising trade tensions between Australia and China in recent weeks are unlikely to meaningfully damage Australian exports. While China may introduce tariffs on Australian coal, it is unlikely to target iron ore and liquefied natural gas. Trade tensions …
16th June 2020
The sharp decline in activity in Australia is set to result in much weaker inflation before long. And even though output will recover rapidly over the coming months as virus restrictions are eased, we think that inflation will remain well below the RBA’s …
9th June 2020
The government today unveiled a grant for buyers of new homes. While grants for first-time home buyers boosted home sales during the global financial crisis, the new scheme won’t offset the impact of the border closure on housing demand. We still expect …
4th June 2020
The RBA sounded cautiously optimistic when it left policy settings unchanged today, but we still think that it will expand government bond purchases soon. The RBA surprised no one by keeping both the target for the cash rate and the target for 3-year …
2nd June 2020
Investors are not increasing their demand for housing and even if they did, owner-occupiers account for 70% of overall housing demand. The upshot is that investors won’t prevent house prices from falling 5-10% in the coming months. Some commentators have …
20th May 2020
The additional $16bn of spending in today’s Budget along with a relatively fast relaxation of the Covid-19 restrictions should reduce the number of job losses in New Zealand. Add in a sharp reduction in labour force participation, and we now think the …
14th May 2020
The Reserve Bank of New Zealand (RBNZ) massively expanded its annual target for asset purchases at its meeting today and we still think the Bank will cut rates into negative territory before long. The Bank’s decision to keep rates on hold at 0.25% was …
13th May 2020
The border closure will result in a collapse in revenue from foreign tourists and a marked fall in revenue from foreign students in Q2. And while the government will probably allow foreign students to enter the country before long, tourism revenue is set …
12th May 2020
Economic activity in New Zealand has started to rebound after its severe lockdown has come to an end. But there are a number of reasons why output won’t return to normal anytime soon. New Zealand moved from a severe level 4 lockdown that restricted …
7th May 2020
The Reserve Bank of Australia (RBA) today left its interest rate targets unchanged but an easing of collateral requirements should provide some support to corporate bond markets. While the financial markets expect the Bank to hike rates in about three …
5th May 2020
The closure of the border will reduce Australia’s potential GDP growth by as much as 1% for as long as it lasts. What’s more, it seems likely that net migration will be lower than before the virus outbreak even if the border reopens. And by reducing …
4th May 2020
The RBNZ’s decision to lift LVR restrictions is unlikely to provide much support to house prices in New Zealand. We think that the sharp decline in home sales and confidence together with the likely drop in migration will result in prices falling by 12%. …
22nd April 2020
Australian banks have passed through the RBA’s recent cuts to some but not all of their lending rates and have tightened lending standards a bit. With banks now in better shape than during the global financial crisis, we think that lending standards won’t …
15th April 2020
The Reserve Bank of Australia (RBA) didn’t announce additional measures at today’s meeting and given the easing in tensions on financial markets we think it won’t adjust policy settings over the coming months. Looking further ahead though, the case for …
7th April 2020
The government assumes that around a quarter of all employees will benefit from the huge wage subsidy unveiled today. Indeed, we now expect the unemployment rate to peak at 12% instead of our previous estimate of 15%. But that still implies an …
30th March 2020
We estimate that a lockdown that would limit activity to “essential services” could knock off as much as 30-40% from Australia’s GDP for as long as it lasts. A lockdown is imminent and our best guess is that it will last for around two months. The upshot …
27th March 2020
The ban on home auctions and open house viewings will probably result in lower home sales and there’s a growing risk that the government will ban the buying and selling of real estate altogether. Even once restrictions to prevent the spread of coronavirus …
25th March 2020
New Zealand is set to enter a near-total lockdown this week which will cause economic activity to all but stop. The RBNZ launched quantitative easing today, but we think that more monetary stimulus will be needed. We expect the Bank to cut the OCR into …
23rd March 2020
Australia is moving closer to shutting down a large share of its services sector and we now expect GDP to fall by 4% this year. The government is responding with a second, larger fiscal stimulus package that should prevent the recession from turning into …
We suspect that the fiscal stimulus package that will be unveiled over the weekend will focus on limiting the damage from the coronavirus outbreak rather than on providing a large boost to demand. Measures will include wage subsidies for employers and …
20th March 2020
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
19th March 2020
The draconian coronavirus containment measures adopted by Australia’s government mean that we now expect GDP to fall by 2% this year. The Australian government is likely to respond with a larger fiscal stimulus package than the one announced last week …
18th March 2020
While the New Zealand government’s large stimulus package will soften the blow from the coronavirus outbreak, it will not prevent a recession. As such, we still expect the RBNZ to launch quantitative easing in the coming weeks. The government today …
17th March 2020
Australian firms were in good shape on the eve of the coronavirus outbreak, but the impending collapse in foreign tourism and weaker retail spending will lift loan write-offs in those sectors. The banks aren’t as well prepared to weather those loan losses …
New comprehensive restrictions on travel mean that both Australia and New Zealand are headed for recession. We expect the Reserve Bank of New Zealand to follow up today’s emergency 75bp rate cut with quantitative easing before long. And the Reserve Bank …
16th March 2020
The large fiscal stimulus package unveiled today may be able to prevent a recession. But we still expect the RBA to cut rates to 0.25% and launch quantitative easing over the next few months. The fiscal stimulus package presented by the federal government …
12th March 2020
We think that the coronavirus outbreak and the related disruptions in China and to tourism more broadly will push the New Zealand economy into recession. That’s why we expect the RBNZ to slash rates by 75bp to help offset the impact of the coronavirus …
11th March 2020
In a moderate scenario where demand returns to pre-coronavirus levels by year-end, we estimate that the outbreak of the disease will knock off 1% from GDP growth this year. In a more severe scenario where the disruptions last beyond the end of the year, …
10th March 2020
Most central banks that have introduced quantitative easing in recent years have done so by pledging to buy a certain amount of government bonds. Our base case is that the RBA will do the same when it launches QE over the coming months, but a yield target …
9th March 2020
We expect the Treasury to announce only a small fiscal package of around $2bn in response to the coronavirus outbreak. With economic activity slowing sharply and revenues undershooting expectations, that should be enough to thwart the government’s aim of …
5th March 2020
With the impact of the coronavirus on economic activity set to intensify, we expect the RBA to follow up today’s 25bp rate cut with another 25bp cut in April. It looks increasingly likely that the disease will weigh on the labour market, which raises the …
3rd March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
The slump in China’s PMIs in February and the continued spread of the coronavirus beyond China has raised the odds that the RBA will cut interest rates at tomorrow’s meeting. On balance though, we still think the Bank will wait until April before cutting …
We estimate that the disruptions to China’s economic activity in the wake of the coronavirus will reduce Australia’s total exports by 3% this month. The drag from fewer Chinese students and tourists arriving in the country could reduce exports by another …
25th February 2020
The New Zealand government’s $12 billion infrastructure package should contribute to a pick-up in business investment and GDP growth from the second half of this year. That supports our view that interest rates have now reached a trough in New Zealand. We …
13th February 2020
The Reserve Bank of New Zealand sounded confident when it left rates on hold today and we think the improvement in underlying economic conditions means the RBNZ’s easing cycle is now over. The Bank’s decision to keep rates on hold was correctly …
12th February 2020
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
10th February 2020
The ultimate impact of the coronavirus outbreak in China on the Australian economy will depend on how quickly the virus is brought under control. But given the disruption that has already happened to tourism and to Chinese demand for Australian goods …
6th February 2020
The Reserve Bank of Australia (RBA) sounded cautious when it left rates on hold today and we think persistent weakness in the underlying economy will force the Bank to cut interest rates to 0.5% in April. The decision to leave rates on hold at 0.75% was …
4th February 2020
Even though house prices in Sydney and Melbourne plunged during the housing downturn, the house price to earnings ratio in both cities is still 40% higher than it was a decade ago. However, we think that housing is only moderately overvalued at the moment …
3rd February 2020
We doubt that the bushfire crisis will prompt a major shift in the Australian government’s attitude towards the mining industry. But the sector’s importance is set to decline either way as mining investment has slumped and a structural slowdown is …
21st January 2020
Banks’ housing lending standards remain tight. But this hasn’t prevented housing arrears from climbing to fresh highs as household balance sheets are stretched. And given that we expect the unemployment rate to creep higher and income growth to remain …
15th January 2020
The deadly bushfires that are ravaging Australia are first and foremost a human tragedy. But there are economic effects to consider, too. We suspect that the impact on consumption and working hours will be negligible, while firefighters working longer …
7th January 2020
Australia’s government pledged to increase spending in today’s Budget update. And its pessimistic forecasts for nominal GDP growth suggest that tax revenue may continue to surprise on the upside, leaving scope for additional fiscal stimulus in the …
16th December 2019
We think that GDP growth in both Australia and New Zealand will fall short of expectations, forcing both the RBNZ and the RBA to cut interest rates more sharply than most expect. The consensus is that both the Kiwi and the Aussie dollar will strengthen …
10th December 2019
The Reserve Bank of New Zealand’s decision to leave mortgage lending restrictions unchanged and tighten capital requirements means that lending and house prices are unlikely to surge in 2020. As such, concerns about financial stability won’t prevent the …
5th December 2019
The RBA turned more optimistic when it kept rates unchanged today but we think that further stimulus will be required before long. We reiterate our long-held view that the Bank will cut rates to 0.25% next year and will launch quantitative easing in the …
3rd December 2019