The latest on Antipodean Central Bank themes - Westpac

Analysts at Westpac noted last week's latest for the Antipodean Central Bank themes.

Key Quotes:

"While the RBA’s January meeting minutes were a little more positive on the consumer – after a modest rebound in retail sales through Q4 – the Board highlighted that “there was still a risk that growth in consumption might turn out to be weaker than forecast if household income growth were to increase by less than expected”. The December quarter wage outcome certainly gives weight to this concern. The current downtrend in house price growth is another risk to the downside, albeit only if the downtrend extends materially from here. As per other recent RBA communications, there is no indication of any urgency to tighten policy. The RBA will look for 2019 to be a live year for policy. However, we remain of the view that they will be on hold in 2019 as in 2018. 

Moving then to New Zealand, this week our NZ economics team released their quarterly outlook. This update comes at a particularly prescient time following marked revisions to the history of growth and as markets and the economy digest the implications of 2017’s change of government. Key themes include: the absence of inflation; an expected slowdown for housing; and a changing growth mix as consumer demand softens and government spending comes to the fore. Westpac expects the RBNZ to remain on the sidelines until the final quarter of 2019. The market is yet to fully factor in this view, instead anticipating the first hike to come by March 2019."