Downturn will prompt policy easing next year

Both economies have dodged a recession so far, but we still consider it more likely than not that output will shrink across the second half of the year. With inflation softening and labour markets loosening, both central banks are done hiking rates and we expect rate cuts next year. The Reserve Bank of Australia is more concerned about rising unemployment than the Reserve Bank of New Zealand which underpins our view that the RBA will cut rates earlier than the RBNZ.