The risks to our interest rate forecasts

While the risks to our forecast that the central banks of Australia and New Zealand will eventually reduce interest rates to new record lows of 1.5% and 2.0% respectively (from 2.0% and 2.75% now) are clearly on the upside, those risks are not yet big enough to force us to abandon our below consensus calls. As such, we still believe that the Australian and New Zealand dollars are more likely to weaken from their current six-year lows than strengthen.