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This page has been updated with additional analysis since first publication. With disinflation gathering pace, rate cuts are now in sight The weaker-than-expected Q4 inflation reading paves the way for the RBA to cut interest rates sooner than most are …
30th January 2024
The Reserve Bank of New Zealand launched a consultation on changes to its macroprudential framework last week. In our view, the proposed tweaks are unlikely to have a meaningful impact on the housing market one way or the other. The big picture continues …
This page has been updated with additional analysis since first publication. RBA’s concerns about weak household spending will rise The sharp fall in retail sales in December adds to the case for the Reserve Bank of Australia to loosen policy settings …
Much ado about nothing The headlines this week were dominated entirely by the Australian government’s decision to redesign the Stage 3 income tax cuts that are due to take effect on July 1 st . The long and short of it is that the government wants to …
26th January 2024
This is a special Global Economics Chart Pack that provides clients with key analysis to make sense of the macro and market impact of the disruptions to maritime shipping. The charts in this document come from our brand-new shipping dashboard , which …
25th January 2024
This page has been updated with additional analysis since first publication. Inflation continues its rapid descent With inflation falling rapidly, risks are tilted towards the RBNZ cutting rates sooner than Q3, as we’re currently predicting. Consumer …
23rd January 2024
While Australian households are as indebted as ever and mortgage payments have hit fresh record-highs, lending standards continue to be sound, loan defaults remain subdued and banks are well capitalised. Accordingly, there’s no compelling case to tighten …
Disinflation unlikely to stall Earlier this week, we learnt that new dwellings commencements continued in a tailspin, with housing starts falling to a 11-year low of 37,000 in Q3. That led some commentators to sound the alarm on how the resulting …
19th January 2024
Central banks in both Australia and New Zealand are likely to remain in “wait and watch” mode in the near term, given lingering risks to the inflation outlook. However, we think concerns about inflation persistence are overdone, especially with tradables …
18th January 2024
This page has been updated with additional analysis since first publication Labour market will turn faster than the RBA anticipates With labour market data for December disappointing expectations, we’re more convinced than ever that the RBA will take its …
In recent months, there have been growing concerns that the rapid rise in rental inflation will force the Reserve Bank of Australia to keep rates higher for longer. To be sure, leading indicators suggest that rental inflation will continue to accelerate …
17th January 2024
Inflation could start with a 3 in December We explained last week why we expect the RBA to cut interest rates earlier than most anticipate and the sharp fall in inflation in November supports our view. The available data suggest that the Q4 inflation …
12th January 2024
Consumer spending continued to tumble in Q4 The continued slowdown in household spending in November further cements our view that the RBA won’t lift rates any higher. The ABS’ monthly indicator suggests that household spending rose by 3.1% y/y in …
This page has been updated with additional analysis since first publication. Disinflation will pave the way for policy loosening before long With price pressures cooling in earnest, we’re growing increasingly confident in our call that the RBA will start …
9th January 2024
This page has been updated with additional analysis since first publication. RBA will look past Black Friday spending spree Although retail sales bounced back with a vengeance in November, that result largely reflected a one-off boost from Black Friday …
A cooling economy will give the RBA cover Earlier this week, the Australian Financial Review published its quarterly survey of economists. By and large, the perception amongst forecasters seems to be that the RBA will retain its hawkish bias for the …
5th January 2024
Australian household finances are in better shape than the plunge in the household savings rate would suggest. While we still think that GDP growth will slow more sharply than expected over the coming quarters, there’s a clear risk that households will …
4th January 2024
Housing market still set to cool Australia’s housing market showed signs of life in December. However, we still think an affordability crunch will temper house price gains in the months ahead. Allowing for seasonal swings, house prices across the eight …
2nd January 2024
Wage growth poised to lose momentum Earlier this week, we found out that Westpac’s leading index edged up once again in November and is consistent with a pickup in economic growth over the next six months. That raises the risk that labour demand will be …
22nd December 2023
House prices will limp along in 2024 Although house prices in Melbourne have started to fall anew, we doubt that they are the canary in the coal mine. A persistent shortfall in housing supply should ensure that house prices across most of Australia keep …
21st December 2023
While the income tax cuts due next year are widely seen as necessary to reverse bracket creep, the income tax burden isn’t particularly onerous by historical standards. However, Australia taxes income far more heavily than most other advanced economies …
20th December 2023
RBA will soon turn dovish The minutes of the RBA’s December meeting reinforce our view that the Bank will be shifting to rate cuts before long. As it has done at virtually every meeting this year, the Board discussed the option of a 25bp rate hike …
19th December 2023
Australian households have built up more excess savings than those in other large advanced economies and we estimate that those savings will only be depleted by the end of 2025. Even so, we still expect consumption growth to keep disappointing. Real …
18th December 2023
“Big Australia” isn’t going anywhere We found out yesterday that population growth in Australia hit a record high of 2.4% y/y in Q2, as the post-pandemic boom in net overseas migration continued apace. (See Chart 1.) Moreover, we estimate that, allowing …
15th December 2023
This page has been updated with additional analysis since first publication Labour market will continue to loosen Even though employment growth remains strong, job creation isn’t fast enough to absorb the surge in the labour force. Accordingly, we expect …
14th December 2023
This page has been updated with additional analysis since first publication A double-dip recession is back in play Output slumped anew in Q3, and we suspect it remained in contractionary territory this quarter as well. Accordingly, we think the RBNZ will …
13th December 2023
Today’s budget update showed that the government now expects a balanced budget in 2023/24, as opposed to the modest deficit it had projected a few months ago. With revenue likely to outperform the government’s conservative assumptions, we think an …
Overview – We suspect that both economies will narrowly avoid a recession but a prolonged period of below-trend growth will reduce price pressures and allow central banks to ease monetary policy again. We’ve pencilled in rate cuts in Australia in Q2 and …
We doubt that the removal of the RBNZ’s employment objective would make much difference to economic outcomes, but forcing the Bank to achieve its inflation target within too short a period of time could cause unnecessary swings in output when inflation is …
11th December 2023
Not higher, not longer Earlier today, the Treasury and the RBA published an updated Statement on the Conduct of Monetary Policy. The revised statement clarified that the RBA’s objective is to return inflation to the mid-point of its 2-3% target. That led …
8th December 2023
Net trade could remain a drag on growth in Q4 Notwithstanding the slight expansion in the goods trade surplus in October, net trade could subtract from growth this quarter. The rise in the goods trade surplus from a downwards-revised $6.2bn in September …
7th December 2023
GDP growth will continue to disappoint GDP growth was softer than most expected in Q3 and with that weakness set to continue, we think that the RBA is done tightening policy. The 0.2% q/q rise in output fell short of the analyst consensus of 0.4% as well …
6th December 2023
Given the high bar for further rate hikes, we’re more confident than ever that the Reserve Bank of Australia is done tightening policy. That said, there is a good chance that the cash rate will remain at its cyclical peak for longer than we currently …
5th December 2023
RBA is done hiking rates Although the RBA won’t tighten policy any further, there is a good chance that the Bank will hold the cash rate at its current peak for longer than we anticipate. The RBA’s decision to leave rates unchanged at its meeting today …
House prices falling again in Sydney and Melbourne Data released by CoreLogic today showed that house prices rose by 0.6% m/m in seasonally-adjusted terms in November, the smallest rise since April. And CoreLogic’s daily data show that house price …
1st December 2023
House prices may soon start to fall again House price growth kept slowing in November and, with affordability the most stretched since the early 1990s, that slowdown has further to run. In seasonally-adjusted terms, house prices across Australia’s eight …
30th November 2023
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
This page has been updated with additional analysis since first publication. Slowdown in private capex has further to run Private investment growth softened in Q3 and firms’ forecasts for 2023/24 suggest that this slowdown has further to run. The 0.6% …
Bullock has continued to sound hawkish, leaving the door open for another rate hike Trimmed mean inflation still stubbornly high, but set to slow further Bank’s next move will be a rate cut, perhaps as early as Q2 next year We expect the Reserve Bank …
29th November 2023
This page has been updated with additional analysis since first publication. RBNZ will cut rates in the second half of next year While the RBNZ signaled that it could hike rates further, we still think that the tightening cycle is now over and that the …
This page has been updated with additional analysis since first publication. Trimmed mean inflation set to fall in earnest before long With trimmed mean inflation only moderating slowly, the RBA may well decide to hike interest rates further next year, …
Black Friday may result in further rise in sales volumes in Q4 While retail sales values fell in October, a renewed boost from Black Friday in November may yet result in a second consecutive rise in sales volumes across Q4. The 0.2% m/m fall in sales …
28th November 2023
Surveys point to renewed slowdown in inflation Following a rather hawkish speech by Reserve Bank of Australia Michele Bullock, the financial markets now price in a 60% chance of another 25bp rate hike at the Bank’s February’s meeting, up from 40% before …
24th November 2023
While subdued capital spending has contributed to the slump in productivity, the recent plunge in the capital/labour ratio can only partly be explained by the surge in net migration. It is now a well-documented fact that Australia’s labour productivity …
23rd November 2023
Recession still looking likely and labour market weakening as expected Bank will probably signal that inflation will return to 2% target earlier than thought Quicker disinflation opens the door to rate cuts in the second half of next year The labour …
22nd November 2023
We believe that central banks in both Australia and New Zealand are done tightening policy. However, given that inflation is far from tamed in either country, policymakers are unlikely to drop their hawkish bias just yet. Although activity has proven …
17th November 2023
Spare capacity is opening up The ABS published a flurry of data this week, which prima facie suggest the labour market is still running red hot. Nevertheless, we remain confident in our decision to call time on the RBA’s tightening cycle . That’s largely …
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
This page has been updated with additional analysis since first publication. The rise in unemployment has further to run Although jobs growth gained momentum in October, a renewed uptick in the unemployment rate should ensure that the RBA doesn’t feel the …
This page has been updated with additional analysis since first publication . Wage growth has likely peaked Notwithstanding the acceleration in wage growth last quarter, we doubt that the Reserve Bank of Australia will tighten policy any further. The 1.3% …
15th November 2023