The AUD and NZD have continued to weaken in 2023 resulting in both AUD/USD and NZD/USD rates moving back closer to multi-year lows between 0.6000-0.6500 and 0.5500-0.6000 respectively. We expect these support areas to hold in the year ahead unless there is a much sharper global slowdown/recession than expected. t also creates more room for the AUD & NZD to rebound when the USD weakens more broadly.

We expect global growth to remain weak in 2024. Cyclical momentum could begin to pick up later in 2024 offering more support for the AUD & NZD to stage a relief rebound.

High household debt levels in Australia and New Zealand still pose the risk of bigger domestic slowdowns in the year ahead. The RNBZ has more room to cut rates after raising rates further into restrictive territory at 5.50% compared to the RBA’s policy rate of 4.35%.