Financial markets are betting on there being a 50 per cent chance of the Reserve Bank of Australia cutting the official cash rate to 1.75pc, from the current 2.25pc, in the next six months.
Many economists believe the Reserve Bank of Australia (RBA) will cut rates again in April or May. New Zealand’s cash rate is tipped to remain on hold at 3.5pc cent over the coming months, data compiled by Bloomberg from the overnight index swaps market shows.
The difference reflects a growing Kiwi economy and sluggish growth in Australia, much of which has been put down to China’s structural refocus on consumer-led growth, rather than infrastructure building.
«(Australia’s) non-mining activity continues to disappoint, and the broadening of the recovery beyond housing remains disappointingly slow,» Australia and New Zealand Banking Group (ANZ) co-head of local economics Felicity Emmett said.
«Below-trend growth will see the unemployment rate edge higher through this year, which will keep pressure on monetary policy. Consequently, we continue to expect the RBA to cut the cash rate next month, and expect rates to stay at historic lows through this year and next,» she said.
The divergence in rate expectations is also leading to a sell-off in the Australian dollar against the New Zealand currency. Since hitting a January high of $NZ1.07, the Australian currency is down 3.5pc and was buying $NZ1.04 early on Monday morning.
The Australian dollar is also trading lower against the US dollar and is buying US76.15¢.
Chinese growth is expected to slow to seven per cent in the year ahead, after many years of double-digit growth.
Australia’s annualised gross domestic product (GDP) growth fell to 2.5pc in the December quarter. New Zealand’s fourth-quarter numbers will be released this week, but in the previous period showed GDP growth at 2.8pc and expectations are that it could increase to three per cent.
Many economists believe the Reserve Bank of Australia (RBA) will cut rates again in April or May. New Zealand’s cash rate is tipped to remain on hold at 3.5pc cent over the coming months, data compiled by Bloomberg from the overnight index swaps market shows.
The difference reflects a growing Kiwi economy and sluggish growth in Australia, much of which has been put down to China’s structural refocus on consumer-led growth, rather than infrastructure building.
«(Australia’s) non-mining activity continues to disappoint, and the broadening of the recovery beyond housing remains disappointingly slow,» Australia and New Zealand Banking Group (ANZ) co-head of local economics Felicity Emmett said.
«Below-trend growth will see the unemployment rate edge higher through this year, which will keep pressure on monetary policy. Consequently, we continue to expect the RBA to cut the cash rate next month, and expect rates to stay at historic lows through this year and next,» she said.
The divergence in rate expectations is also leading to a sell-off in the Australian dollar against the New Zealand currency. Since hitting a January high of $NZ1.07, the Australian currency is down 3.5pc and was buying $NZ1.04 early on Monday morning.
The Australian dollar is also trading lower against the US dollar and is buying US76.15¢.
Chinese growth is expected to slow to seven per cent in the year ahead, after many years of double-digit growth.
Australia’s annualised gross domestic product (GDP) growth fell to 2.5pc in the December quarter. New Zealand’s fourth-quarter numbers will be released this week, but in the previous period showed GDP growth at 2.8pc and expectations are that it could increase to three per cent.