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2 months ago | 
westpac.com.au | James Thornhill |Flora C.Y. Lee |Josh Wall |Luci Ellis
Inflation eased by more than expected in the December quarter prompting Westpac Economists to bring forward their forecast for an RBA rate cut to as soon as February. The headline consumer price index (CPI) cooled to an annual rate of 2.4 per cent, below the mid-point of the RBA’s 2-3 per cent target band, while the trimmed mean – closely watched by the RBA as a measure of underlying inflation – fell to 3.2 per cent. Both results were a shade below the forecasts of Westpac economists.
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Jan 18, 2025 | 
interest.co.nz | Luci Ellis |David Hargreaves
By Luci Ellis*The shift to a more services-based economy increases economy-wide depreciation rates, and so the need to invest. Higher average interest rates – and economy-wide profit shares – are among the likely results. An important reason for our house view that the global structure of interest rates will be higher going forward than it was pre-pandemic relates to the balance between saving and investment.
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Dec 10, 2024 | 
westpac.com.au | James Thornhill |Josh Wall |Flora C.Y. Lee |Luci Ellis
A dovish shift in the RBA’s language following its December Board meeting suggests that a rate cut as soon as February cannot be ruled out. The Reserve Bank of Australia left the cash rate on hold at 4.35 per cent at its final meeting of the year, as expected, but said it’s gaining confidence that inflation is declining in line with its expectations.
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Nov 20, 2024 | 
westpac.com.au | Ben Young |James Thornhill |Liam Cormican |Luci Ellis
We have revised our view of the most likely scenario for the path of the RBA’s cash rate, pushing out the start date of the rate-cutting cycle from February to May, but more front-loaded than previously assumed. We now expect consecutive 0.25 per cent cuts at the RBA’s Board meetings in May and July. That would follow a similar pattern to what we’ve seen from international peers including the Federal Reserve and RBNZ and mark an acceleration from our previous forecast of one cut per quarter.
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Nov 5, 2024 | 
westpac.com.au | James Thornhill |Luci Ellis
The Reserve Bank of Australia left the cash rate on hold at 4.35 per cent at its November Board meeting, as widely expected. While price pressures are easing broadly in line with the RBA’s expectations, the Board remains concerned that underlying inflation is still well above the 2-3 per cent target range and declining only gradually.
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Oct 30, 2024 | 
westpac.com.au | James Thornhill |Luci Ellis
September quarter inflation came in slightly below expectations but does not change our view that the RBA won’t start cutting interest rates until February at the earliest. The latest consumer price index data confirmed that the disinflation trend remains on track and supply-side concerns are easing, with the headline rate falling to 2.8 per cent for the year to end-September (Westpac forecast: 2.9 per cent) – back inside the RBA’s 2-3 per cent target band.
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Oct 25, 2024 | 
westpaciq.com.au | Luci Ellis
One of the frustrations of the post-GFC period was the way some people (and international agencies) assumed that historical averages of key ratios like housing prices or debt to income defined ‘normal’. If one of these macro ratios was well away from that historical average, it was an ‘imbalance’ that needed to be corrected, it was claimed. The problem with this idea is that often the metric in question does not have a ‘right’ level that prevails through time.
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Oct 11, 2024 | 
westpaciq.com.au | Luci Ellis
Most peer central banks are already cutting rates and some are front loading the cuts. The Fed and the RBNZ have seemingly declared 50 to be the new 25, though it is not clear that the FOMC will continue at that pace. The ECB may also want to pick up the pace to offset fiscal consolidation, as Westpac economics colleague Illiana Jain points out in her piece in our latest Market Outlook report released this week.
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Oct 4, 2024 | 
westpaciq.com.au | Luci Ellis
Last week we noted that, in its September post-meeting communications, the RBA was no longer saying that wages growth was ‘above the level that can be sustained given trend productivity growth’, as it did in August. How did it make that judgement in the first place, and why does trend productivity growth come into the story? The answer rests on the RBA’s beliefs about how the economy works, based on analytical frameworks first introduced in the 1990s.
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Sep 13, 2024 | 
westpaciq.com.au | Luci Ellis |Matthew Hassan
This week we released our refreshed forecasts in our September Market Outlook (PDF 2MB) publication. While the short-run outlook is broadly the same, the balance of risks on growth has changed further out by enough to alter our base case for growth into 2026. This is partly because the mix and timing of demand growth has shifted.
