Barclays on their AUD outlook for the coming year

  • We do not expect further NZD weakness and think market concerns over potentially growth negative policies of the Labour/NZ First coalition are overdone
  • Risk premia associated with policy uncertainty are fadng as the government reveals more of its poicy intentions
  • NZ economy is relatively strong among the G10, with a dosed output gap, relatively low unemployment, and inflation expectations above the RBNZ's target midpoint
  • While stricter immigration policies could slow economic growth, both Labour and NZ First acknowledge the need for immigration to meet critical skills gaps
  • It is not clear to us that additional objectives or a move to a committee-based decision making approach portend materially different monetary policy settings and a weaker NZD
  • Labour's manifesto suggests fiscal policy will contnue to support household consumption