Inflation key issue
As 2024 unfolds, more than 80 countries, encompassing more than half of the world’s population, will head to the polls, with the recent elections in France and upcoming UK elections highlighting significant shifts and economic implications, Kiwibank reported.
France’s far-right surge
France held the first round of parliamentary elections last Sunday, with the far-right National Rally (RN) leading with over a third of the vote. The second round is this Sunday, and a victory for RN would mark France’s first far-right government in the post-war period.
“An absolute majority of the RN will likely see public borrowing swell,” said Kiwibank economists Jarrod Kerr, Mary Jo Vergara, and Sabrina Delgado (pictured above, from left to right).
UK election uncertainty
The UK will hold a rare July general election this Thursday. Opinion polls suggest a likely victory for the Labour Party.
“The new government will inherit a relatively stable economy, but poor public finances with a ballooning public debt of £2.7 trillion,” the Kiwibank economists said.
Inflation concerns
Inflation remains a critical issue globally and domestically.
Australia’s inflation data for May showed prices rising by 4%, leading to mixed signals about the economy’s direction.
“Commentators are questioning the direction of Aussie rates,” the Kiwibank economists said.
Domestic confidence weakens
In New Zealand, business and consumer confidence continue to weaken.
The NZIER Quarterly Survey of Business Opinion will likely reflect this ongoing softness.
“It’s a white-knuckle ride for many, but if the economy evolves as expected, we see the RBNZ delivering the first rate cut in November,” the Kiwibank economists said.
Market reactions
Financial markets remain volatile, with Kiwi rates influenced by international data.
“Kiwi rates [are] likely to remain range-bound with no catalysts until July MPS next week,” said Matthew Crowder, Balance Sheet Manager – Treasury.
In currencies, the NZ dollar declined, influenced by global market conditions.
Key data and events
This week’s critical events include the NZIER June quarter survey, the US June jobs report, Euro-area inflation data, and the minutes of the ECB's June meeting.
The ECB Forum on Central Banking will also feature discussions with US Federal Reserve chairman Jerome Powell and ECB president Christine Lagarde, Kiwibank reported.
To read the Kiwibank analysis in full, click here.
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