AUSTRALIA: May Election Likely But Polls Still Point To Hung Parliament
Over the weekend, there were widespread press reports that a federal election would have been called for April 12 to avoid a mini budget having to be announced but had to be delayed because of Cyclone Alfred. Given the legal requirement that 33 days need to pass between the announcement and the vote, the time has now elapsed making a May poll the most likely. It has to be held by May 17. Recent polls have shown a narrowing between the two major parties but consistently point to a minority government outcome, which is likely to result in political instability.
- Polls generally have the 2-party preferred vote split around 49:51 with some in favour of the incumbent Labor Party (ALP) and some the opposition coalition of Liberals and Nationals, leaving the average around 50:50. In the May 2022 election, the split was 52.1% for Labor and 47.9% the coalition.
- In terms of the primary vote, the average of the March polls has the coalition gaining 1.7pp from the May 2022 election to 37.4%, ALP losing 2.5pp to 30.1%, Greens gaining 0.8pp to 13%, One Nation 1.2pp to 6.2% and independents 1.7pp to 12.1%. The latest Essential survey suggests that undecideds are low at only 5% of the total.
- The ALP has 77 seats out of a total of 151 in the current parliament and a 2.1% swing against it would see the Coalition win 5 seats from it. This would leave it still the largest party in parliament but short of the 76 needed for a majority. It could form a coalition with the Greens, who currently hold 4 seats, or with left-leaning independents who have around 8 seats.
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CHINA: China’s PPI and CPI Telling Two Different Stories.
- In out data preview last week we forecast two different stories coming from the PPI and CPI data releases over the weekend, and that certainly was the case.
- Mired in deflation, PPI’s print was weaker than consensus at -2.3% (consensus -2.2%; prior -2.3%) and was the 28th month in succession of decline speaks to the absence of pricing power that corporates have.
- CPI however tells a different story rising +0.5% YoY (consensus +0.4 ; prior +0.1%)the first rise since August last year.
- The largest contributor to the rise was food prices up +0.4% and services +1.1%.
- Core rose 0.6% YoY from 0.4% in December.
- The MoM figures sees CPI rising +0.7%.
- Authorities will be heartened by the CPI numbers, given the focus on improving consumption in the economy whilst being conscious of the distorting effect of the Lunar New Year holidays would have had on this month’s release.
STIR: RBNZ Dated OIS Firmer Than Pre Q4 Labour Market Data Levels
RBNZ-dated OIS pricing is 2–10bps firmer than pre-Q4 Labour Market data levels from last Wednesday.
- The Q4 unemployment rate rose 0.3pp to 5.1%, aligning with both consensus expectations and the RBNZ’s forecast. This marks the highest level since the Covid-impacted Q3 2020. Employment declined 0.1% q/q, bringing the annual drop to 1.1% after a revised -0.6% in Q3. Wage growth continues to moderate, hovering around or below 3%.
- As the data largely matched the RBNZ’s November projections—which included a forecasted 50bp rate cut in Q1 2025—another 50bp cut on February 19 remains likely.
- Markets are pricing in 48bps of easing for February, with a total of 120bps expected by November 2025.
Figure 1: RBNZ Dated OIS Today vs. Pre-Data (%)
Source: MNI – Market News / Bloomberg
JAPAN DATA: Current A/C Aided By Trade Surplus, Local Investors Sell EU Debt
Japan's Dec current account in seasonally adjusted terms, printed ¥2731.6bn, close to market expectations and versus ¥3033.4bn prior. The trade balance, on a BoP basis was ¥62.3bn, below forecasts of ¥227.7bn (per the BBG consensus). In seasonally adjusted terms the trade balance was back in surplus though (¥214.1bn). This was the first such surplus since 2021.
- The current account balance sits just off cycle highs in Dec, which is plotted below against the trade balance (which in millions of yen, not billions).
- Other data showed a bias to sell offshore debt in December, particularly in terms of the EU. There was a record amount of Italian debt sold, while outflows were also noted from Germany and France. Fiscal concerns a likely driver of such outflows.
Fig 1: Japan Current Account & Trade Balance Trends (Yen)
Source: MNI - Market News/Bloomberg
