Australian Economy

Which Reserve Bank will blink first?

Justin Fabo from Antipodean Macro published the below chart showing market interest rate pricing for Australia and New Zealand:

Policy rate expectations

As you can see, both central banks are tipped by markets to lower interest rate this year.

However, the Reserve Bank of New Zealand (RBNZ) is tipped to commence its easing cycle later than the Reserve Bank of Australia (RBA); although the RBNZ is tipped to cut rates harder.


The available economic data suggests that the RBNZ should commence its easing cycle earlier than Australia, and should also cut harder.

New Zealand and Australian inflation are on similar trajectories:

Quarterly core inflation

However, New Zealand’s economy is significantly weaker than Australia’s, experiencing both a technical recession and a very deep per capita recession:


NZ real GDP

The next chart from Dr Cameron Murray at Fresh Economic Thinking shows the massive quarterly declines in both per capita GDP and real gross disposable income experienced across New Zealand over the five quarters to end-December 2023:

NZ per capita GDP


New Zealand’s labour market is also faring worse than Australia’s.

New Zealand’s unemployment rate was 4.0% in Q4 2023 (latest available datapoint) versus 3.8% (trend) in Australia.

NZ unemployment rate


The number of applicants per job ad in New Zealand is also tracking at record highs, according to SEEK:

SEEK NZ employment data

Applications per job ad have also soared in Australia, but to a lesser extent than New Zealand:


SEEK employment data

Based on the above key macroeconomic data, the RBNZ should commence its easing cycle earlier than the RBA and also cut rates harder.

Whether it will, however, remains to be seen.


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