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As was widely expected, the RBNZ cut its Official Cash rate by 25bp, to 3.25%, today. The revelation that the decision to cut was not a unanimous one has been interpreted as a hawkish signal by financial markets. However, we would put more emphasis on the …
28th May 2025
RBNZ cuts by 25bp, signals further easing is likely With the RBNZ clearly concerned about the health of the economy, we continue to believe that its easing cycle has much further to run. The RBNZ’s decision to cut rates by 25bp, to 3.25%, at its meeting …
Hot CPI print will give the RBA pause for thought With underlying price pressures proving somewhat persistent, we're sticking to our view that the RBA won't cut rates as far as markets are anticipating. According to the monthly CPI indicator, headline …
How will Australia weather the China slowdown? Although the détente in the trade war may provide some respite to the Chinese economy in the near term, we remain pessimistic about its longer run prospects. The slowdown in China will undoubtedly have …
27th May 2025
Inflation fight isn't over yet While the RBA’s decision to cut rates by 25bp at its meeting on Tuesday was widely expected, the Board’s overtly dovish messaging still caught most observers off guard. Indeed, Governor Bullock made news in her post-meeting …
23rd May 2025
With housing affordability still extremely stretched, we expect house price growth to remain muted even as mortgage rates are set to fall further. However, there’s more scope for dwellings prices to rise in the smaller capital cities, while apartment …
22nd May 2025
Output growth slows, inflationary pressures ease The step-down in business activity this month, combined with signs of easing price pressures, supports our view that the RBA’s easing cycle has further to run. According to today’s flash estimate, the …
The RBNZ is all but certain to cut its cash rate by 25bp, to 3.25%, at its meeting ending on 28 th May. With the recovery showing signs of faltering, the labour market remaining weak, and underlying inflation continuing to fall, we expect the Bank to …
21st May 2025
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
20th May 2025
RBA cuts by 25bp, leaves the door open for further easing With the Bank growing increasingly concerned about downside risks to the economy, there is a good chance that it will cut rates further than we are currently anticipating this cycle. The RBA’s …
Inflationary pressures linger on In case you missed it, our RBA Watch explains why we expect the Bank to cut rates by 25bp, to 3.85%, at its meeting next week. However, we suspect that the cut will be a somewhat hawkish one, with the Board reluctant to …
16th May 2025
Labour market continues to fire on all cylinders With the labour market going from strength to strength, we’re more convinced than ever that the RBA will be reluctant to cut rates aggressively. Accordingly, we’re sticking to our forecast for a terminal …
15th May 2025
With trimmed mean inflation entering the RBA’s target band for the first time since 2021, the Bank will almost certainly lower interest rates by another 25bp at next week’s meeting. However, amidst early signs that price pressures are strengthening again, …
14th May 2025
Wage growth should moderate again before long The pick-up in wage growth in Q1 won’t prevent the RBA from cutting interest rates next week but it will limit the scope of additional easing thereafter. The 0.9% q/q rise in the wage price index last quarter …
The recent climbdown has left the effective US tariff rate on the rest of the world at around 15% as opposed to the 27% which was threatened at the height of this year’s trade war. While this is still the highest since the 1930s, it is unlikely to cause a …
13th May 2025
Global Trade Stress Monitor …
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs. This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and …
12th May 2025
Data flashing mixed signals On the face of it, developments this week strengthen the case for the RBA to err on the side of looser policy, rather than simply withdraw monetary restraint. For starters, the ABS’ Household Spending Indicator suggests that …
9th May 2025
Around half of the recent surge in gold exports reflects soaring prices. While the latter may encourage mining firms to expand output, it will probably take years for gold production to return to its 2019 peak. Accordingly, gold exports won’t fill the gap …
8th May 2025
This page has been updated with additional analysis since first publication. Ample spare capacity in the labour market will support disinflation Although New Zealand’s unemployment rate held steady in Q1, the details of today’s jobs report were far from …
7th May 2025
Labor expands majority in election blowout The Australian Labor party, led by Prime Minister Anthony Albanese, is cruising towards victory in yesterday’s federal election. Given that our forecasts assumed policy continuity, we are inclined to leave them …
4th May 2025
RBA still on track to deliver shallow easing cycle This week we learnt that Australia’s trimmed mean inflation fell from 3.2% in Q4 to 2.9% in Q1, returning it to the RBA’s 2-3% target band for the first time in over three years. While that outturn was …
2nd May 2025
Weak retail spending raises risk of looser monetary policy With consumers spending remaining sluggish, risks to our interest-rate forecasts are tilted to the downside. The 0.3% m/m rise in sales values in March was a bit softer than the 0.4% increase the …
Stretched housing affordability continues to keep a lid on house price growth. And if we’re right that the RBA will only lower rates by another 50bp, it will remain a headwind. But with the housing market no longer creating upside risks to inflation, …
1st May 2025
CPI data don’t support the case for below-neutral rates Although trimmed mean CPI gained a bit of momentum in q/q terms last quarter, it probably won’t keep the RBA from cutting rates by another 25bp at its May meeting. However, given lingering price …
30th April 2025
Case for aggressive easing remains weak Flash PMI data released this Wednesday suggest that ongoing global tensions are doing little to dent business confidence in Australia. Although firms reported a second successive decline in new export business as a …
25th April 2025
At first glance, Australia and New Zealand should be fairly insulated from the brunt of the US’s ongoing trade war. Both countries have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. That said, second-round …
24th April 2025
PMI data bolster the case for a shallow easing cycle Early signs suggest that the economy is holding up well despite heightened uncertainty. With firms also reporting stronger inflationary pressures, we’re sticking to our view that the RBA won’t cut rates …
23rd April 2025
RBA will go slow and steady The minutes of the RBA’s April meeting revealed that the Bank’s decision to leave rates unchanged at 4.10% was underpinned by its view that risks to its outlook were two-sided. Granted, that assessment was made prior to Trumps’ …
17th April 2025
Strong labour market lessens the need for aggressive cuts With the labour market broadly on solid ground, we expect the RBA to deliver only a shallow easing cycle. The 32,00 rise in employment in March was a touch softer than the 40,000 increase that we …
RBNZ won’t fret the modest uptick in inflation Although headline inflation in Q1 was stronger than it had anticipated, we suspect the RBNZ will take comfort from the fact that measures of core inflation continued to fall towards the mid-point of its 1-3% …
The upcoming federal election on 3 rd May appears likely to result in a hung parliament. Although the ruling Labor party’s recent uptick in the polls suggest that it is in pole position to form a minority government, we wouldn’t count out the …
16th April 2025
While the recent drop in crude oil prices would lower inflation a bit, that drag will be more than offset by a boost from the weaker Australian dollar. The upshot is that barring a sharp fall in business confidence, we’re sticking to our forecast that the …
14th April 2025
Australian economy should hold up As one might have expected, the fallout from Trump’s trade war continued to dominate the headlines this week. In short, a deep rout in US bond markets appears to have convinced Trump to pare back tariffs on several …
11th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
10th April 2025
RBNZ will cut further than most anticipate The RBNZ cut rates by 25bp at its meeting today, while signalling that further easing would be forthcoming in the months ahead. We think the Bank will ultimately loosen policy settings to a greater degree than …
9th April 2025
Australia and New Zealand are safe havens in the current global trade storm because they have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. We’re therefore sticking to our forecast that the RBA will only …
7th April 2025
More policy support may be forthcoming Although the RBA left rates unchanged on Tuesday, it sounded a lot more dovish than it did in February. Indeed, it significantly toned down its concerns about upside inflation risks and the dangers of prematurely …
4th April 2025
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
We expect the Reserve Bank of New Zealand to cut its Official Cash Rate by 25bp, to 3.5%, at its next meeting on 9 th April. Although activity is now on the mend, spare capacity will ease only gradually, consistent with a sustained decline in …
2nd April 2025
While the RBA is becoming increasingly confident that inflation will sustainably return to target, we still expect its easing cycle to be shallower than most anticipate. The RBA’s decision to leave its policy rate unchanged at 4.10% was correctly …
1st April 2025
RBA’s easing cycle will be shallow While the RBA is becoming increasingly confident that inflation will sustainably return to target, we still expect its easing cycle to be shallow. The Bank’s decision to leave the cash rate unchanged at 4.10% was …
Australian house price growth remained soft in March, amid still-weak housing demand. Although the RBA’s easing cycle could help deliver a shift in momentum later this year, stretched affordability is likely to constrain the strength of the rebound. Much …
Consumer spending remains muted With consumers seemingly keeping spending on a tight leash, there is a risk that the RBA will loosen policy a bit more than we currently expect this cycle. The 0.2% m/m rise in retail sales values in February was a touch …
RBA will cut two more times this year Australian Prime Minister Anthony Albanese confirmed today that the next general election will be held on 3 rd May. The announcement comes closely on the heels of the government’s 2025/26 Budget , which includes an …
28th March 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
27th March 2025
The Reserve Bank of Australia will leave policy settings unchanged at its upcoming meeting that ends on 1 st April and will probably still sound hawkish. However, with inflation set to soften a touch faster than the Bank had anticipated, we still expect …
26th March 2025
Weakness in Australia’s underlying inflation points to May rate cut The weakness in underlying inflation means that the RBA will probably cut rates again 25bp in May and creates some downside risks to our forecast that the Bank will only cut rates to …
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
25th March 2025
As expected, Australian Treasurer Jim Chalmers unveiled a slew of new spending measures in today’s pre-election Budget. However, we don’t believe the scope of fiscal expansion is large enough to keep the RBA from cutting rates a bit further this year. In …
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