Eyes on the RBA and RBNZ

Kia ora,

Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with news the world is working out how live with a capricious America.

First though, the week ahead will feature Wednesday afternoon's OCR review from the RBNZ, preceded Tuesday by the RBA's cash rate review. The Aussies are expected to cut their rate by -25 bps to 3.60% but the RBNZ is expected to hold at 3.25%. We will be covering the outcomes and implications of both reviews.

Both Malaysia and South Korea will also be reviewing their official rates. The Malaysian will likely leave their rate unchanged at 3.00%, and the South Koreans are expected to cut theirs by -25 bps to 2.25%.

In the US, apparently negotiating trade deals is complicated (who knew?) so Trump is dispensing with all that and just "sending letters" unilaterally. "90 deals in 90 days" is too hard for him. He might have got one over the line with Vietnam (he claims but the Vietnamese haven't confirmed). He sort of got one with the UK but before the 90 day clock started. And the China one he claims leaves the US in a worse position. His Treasury Secretary is promising "a few more" over the next few days and weeks. "Best deal maker of all time".

And we should probably note that the integrity of official US data, from the Census Bureau, the BLS and the BEA, all now under Trump control (in the Lutnick Commerce Department), is getting increasingly questioned. Sharp budget cutbacks is resulting in fewer actual surveys, more 'estimates by officials'. Even Fed boss Powell expressed concern over the issue in questioning at the recent Congressional testimony. The data reporters are moving to a "Make Trump Look Good" approach.

Suspicion is rising because there are widespread indications tariff-tax price increases are being pushed through but the BLS data isn't reflecting that.

In China we will get CPI and PPI updates for June later this week. It would be supremely ironic if users came to view Chinese economic data was more trustworthy than American. It no longer seems far-fetched.

Across the Pacific in Japan, household spending jumped +4.7% in May from a year ago, reversing a -0.1% fall in April and far exceeding an expected +1.2% rise. It was their fastest growth since August 2022, and that August 2022 was only good because it was off the very weak pandemic-affected base a year earlier.

Singaporean retail sales rose by +1.4% in May from a year ago, accelerating from a downwardly revised +0.2% rise in April. This was the third straight month of growth and the fastest annual increase since January. But to be fair, most of the increase was driven by car sales, a very expensive and exclusive corner of their retail sector.

Next, halfway around the world, EU producer prices eased again in May so that it is only +0.4% higher than year ago levels, less in the euro area. The past three months have delivered producer prices lower than in each of the prior months.