Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

JP Morgan - Financial Forecast

JP Morgan - Financial Forecast

Previously, we had forecast that the RBNZ would cut the official cash rate (OCR) at least 100bp on Thursday. Now, though, following the RBA's decision today to cut Australia's cash rate a larger than expected 100bp (JPMorgan and consensus -75bp) and the latest dismal news on global manufacturing, including another fall in the US ISM last night and a record low on China's and the UK's PMIs yesterday, we think the RBNZ will cut the OCR 150bp this week, taking the key rate to 5%.

Indeed, the RBNZ appears to have more work to do than its neighbouring counterpart, given recent economic data signalling an even deeper recession in the New Zealand economy (including last week's dire business sentiment survey discussed below). Furthermore, the rising prospect that inflation will return to the RBNZ’s target range more quickly than previously forecast points to the need for more assertive policy easing. As indicated by data last week, pipeline pressures and inflation expectations have started to ease and, in our forecasts, inflation will fall below the RBNZ’s target range of 1-3%oya by 4Q09.

The Kiwi economy already has contracted for two straight quarters and, on our forecasts, GDP should decline for at least another three. Falling house prices and rising job losses make the outlook for already weak household spending particularly bleak. Lower interest rates and personal income tax cuts may provide something of a floor, but these will be undermined to a large extent by low confidence, mainly because of increased anxiety about job security; this view was confirmed last week by the details in the NBNZ business confidence survey.

The business confidence measure worsened to -43.0 in November from -42.3, suggesting a net 43% of respondents expect business conditions to worsen in the coming year. Furthermore, firms look set to shed additional human capital, with 86% of respondents expecting the unemployment rate to rise in the coming year (up from 79% previously). Indeed, the more important reading of firms’ own activity expectations slumped from -11.4 to -14.1, the lowest reading .JP Morgani

We maintain our forecast of a terminal RBNZ cash rate of 3.25%, half the prevailing rate of 6.5%. One factor arguing against an even lower terminal cash rate is the forthcoming fiscal stimulus. Finance Minister Bill English recently estimated that the government’s fiscal stimulus package would inject about NZ$7 billion into the economy over the next two years, or about 4% of GDP. Details of the package are expected in mid-December after Parliament resumes.    

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Statistics New Zealand: COVID-19 Sees Record 12.2 Percent Fall In New Zealand’s Economy

Gross domestic product (GDP) fell by 12.2 percent in the June 2020 quarter, the largest quarterly fall recorded since the current series began in 1987, as the COVID-19 restrictions in place through the quarter impacted economic activity, Stats NZ said ... More>>

ALSO:

Climate: Scientists Release ‘Blueprint’ To Save Critical Ecosystems And Stabilize The Earth’s Climate

A group of scientists and experts produced the first comprehensive global-scale analysis of terrestrial areas essential for biodiversity and climate resilience, totaling 50.4% of the Earth's land. The report was published in Science Advances ... More>>

ALSO:

MPI: Independent Review Launched Into Assurances For Safe Transport Of Livestock By Sea

The Ministry for Primary Industries (MPI) has launched an independent review of the assurances it receives for the safe transport of livestock by sea. MPI Director-General Ray Smith says Mike Heron QC has been appointed to lead the review, which is expected ... More>>

ALSO:


Computers: New Zealand PC Market Grows Nearly 40% Due To Work From Home Demand

COVID-19 had large impacts on demand for PCs as businesses prepared for lockdowns by purchasing notebooks to mobilise their workforce. In the second quarter of 2020, New Zealand's Traditional PC market experienced a 39.7% year-on-year (YoY) growth ... More>>

ALSO:

Mediaworks: Reaches Agreement To Sell TV Operations To Discovery, Inc.

New Zealand’s largest independent commercial broadcaster MediaWorks and the global leader of real-life entertainment Discovery Inc. (“Discovery”) are pleased to announce they have reached a binding agreement regarding the sale of MediaWorks’ ... More>>

ALSO:

Ministry of Health: Public Transport Distancing Requirements Relaxed

Physical distancing requirements on public transport have been reviewed by the Ministry of Health to determine whether they are still required at Alert Level 2 (or below). The Ministry’s assessment is that mandatory face covering and individuals tracking ... More>>

ALSO:

NZHIA: New Zealand Hemp Industry Set To Generate $2 Billion Per Annum And Create 20,000 Jobs

A new report says a fully enabled hemp industry could generate $2 billion in income for New Zealand by 2030, while also creating thousands of new jobs. Written by industry strategist Dr Nick Marsh, the report has prompted calls from the New Zealand Hemp ... More>>

ALSO:

Stats NZ: One In 14 Employed People Report High Risk Of Losing Jobs

About one in 14 workers say they expect to lose their job or business by mid-2021, Stats NZ said today. A survey of employed people in the June 2020 quarter showed 7 percent felt there was a high or almost certain chance of losing their job or business ... More>>

ASB Quarterly Economic Forecast: NZ Economy Doing Better Than Expected, But Challenges Remain

August lockdown estimated to have shaved 8% off NZ’s weekly GDP, and 0.5% off annual GDP Economy now expected to shrink 5% (year-on-year) by end of 2020 Unemployment rate now expected to peak at 7.2% The latest ASB Quarterly Economic Forecast is less ... More>>

ALSO:

SAFE: Live Export Ship Carrying 5,800 New Zealand Cows Goes Missing In East China Sea

Livestock carrier Gulf Livestock 1 sent a distress signal at 4:45am NZT yesterday in the East China Sea. The area is affected by Typhoon Maysak. At 4pm a patrol plane spotted a lifeboat - with no people in it - and a man in lifejacket nearby. The ship ... More>>

ALSO:

FMA: Kiwisaver Fees Don't Match Performance

The Financial Markets Authority (FMA) today published an independent report into the passive and active investment management styles [i] used by KiwiSaver providers. The FMA commissioned MyFiduciary to test the extent that KiwiSaver providers were ... More>>