"I don't see the pre-conditions for recession today," says ANZ Australian chief economist Richard Yetsenga.
Sydney-based Yetsenga was in New Zealand last week offering up his view of how this economic cycle is shaping up - on both sides of the Tasman.
He sees a tough year ahead as central banks hike rates to get inflation back under control.
But he believes we're well placed to get through it.
"Yes, central banks tightening when they're behind the curve, it should make us nervous...I'm less confident than I was before," he said.
"But also a recession also typically requires some sort of financial excess to really create those legacy problems. Business bankruptcies, large increases in unemployment, banks becoming very hesitant to lend because they are worried about the quality of their lending portfolios."
"I don't see what those excesses are. This cycle has been so quick that in Australia, New Zealand, the US, the household sector seems to be in pretty good shape."
Clearly Australia and New Zealand are facing many of the same international economic forces but there are some key differences, he said.
One is that inflation has been lower across the Tasman and that's meant the Reserve Bank of Australia (RBA) has been much slower to start lifting interest rates.
Last month the RBA increased interest rates for the first time in more than 11 years, with a 25-basis-point hike taking the cash rate target to 0.35 per cent.
It is expected to hike rates again later today, with economists evenly split on expectations the cash rate will be lifted either by 25 basis points to 0.6 per cent, or 40 basis to 0.75 per cent.
In contrast the RBNZ started lifting rates last October and has already hiked the OCR from its record low of 0.25 per cent to 2 per cent.
"Both central banks are hiking rates. Australia is a little bit behind and both have inflation a bit higher than we'd like," Yetsenga said.
There were a few reasons contributing to the higher inflation here in New Zealand, he said.
"We did a bit more easing during the pandemic.
"We were a bit more affected by the closing of the borders with the restricted population flow hitting our labour supply harder."
Then more broadly Australia's economy historically tended to be "under-inflation prone" relative to New Zealand's, he said.
Those three things had together conspired to create a sharper more intense rebalancing in New Zealand.
"Australia had this pre-pandemic period of under-shooting on inflation. The central bank was not as confident about their ability to forecast inflation as they had been before," he said.
"They waited quite a bit longer than they might normally have. So there was also that difference in policy approach."
Despite those differences in scale and timing around inflation there were plenty of similarities in the two economies right now, he said.
For example, labour shortages were also becoming acute in Australia.
"In sectors that are reliant on global labour there are shortages. But also further up the income scales as well - in tech, professional services, they're after talent."
But it was important to remember that this was a global issue.
"If you go to London or New York or Singapore I think you'll find the same shortages so unless we find some Martians to bring down there are some pressures on labour that we can't really do anything about."
Yetsenga acknowledges classic Kiwi concerns about the Australian labour market as a drain on local workers.
The outflow to Australia was "probably an additional dynamic" in New Zealand, which meant that reopened borders wouldn't necessarily relieve the labour market story.
"I wouldn't mind if New Zealand sent a few more rugby players to Australia," he joked.
But he also argued that the open borders were unlikely to solve Australia's macro-economic issues either.
There were a number of global issues that were at play now because almost every nation had followed the same policy path.
"Everyone eased through 2020 and kept policy easy in 2021. Now the pressure in 2022 is to take that easing policy back."
However, he warned against being overly focused on those international issues.
"I think viewing it as a common story is better than viewing it as your country buffeted around by global forces," he said.
"Because that takes your eye off the domestic policy forces, which is ultimately the only thing we can control."
New Zealand's money supply was still about 20 per cent higher than it was pre-pandemic, Australia's was 24 per cent higher and the US 44 per cent higher, he said.
"Productive capacity hasn't grown anywhere near as much. There's too much money chasing the productive capacity. We need to raise interest rates to encourage both individuals and businesses to keep some of that money in the bank so we don't overwhelm the economy.
"We have seen the dark side of inflation in the past 12 months. Perhaps we got a little too comfortable with the idea that low and slow inflation was entrenched."
In Australia the high cost of living was a key issue in last month's election where a new Labor government came to power.
How much will a different government change the outlook for Australia's economy?
"It doesn't change the numbers I have for things like interest rates or GDP, but it changes my sense about where the economy is at," Yetsenga said.
Broadly the change of government provided an opportunity for a bit of a pause and refresh.
But there were a couple of areas where the Labor Government would be markedly different.
"One is in the labour market, supporting a higher minimum wage increase and perhaps putting a bit more emphasis on being a bit choosier around which streams of migration will come back."
The other area was climate change policy.
"There will be an ability to reset the agenda," he said.
The Labor Government was likely to deliver some more targeted planning around the climate transition for specific industry sectors, he said.
This week Australia reported first quarter GDP growth at 0.8 per cent in the March quarter and 3.3 over the past year.
That was down on the previous quarter's big bounce back from Omicron but ahead of market expectations.
In New Zealand, first quarter data due on June 16 is expected to capture some of the bounce back from Omicron.
From this point, Yetsenga said he expected a slowdown in both economies.
"When monetary policy is tightening we should expect that."
Can we get through this cycle without a recession?
"At the risk of being technical we define every cycle from one recession to the next. So the cycle will always end with recession."
But that doesn't mean recession is imminent.
"It's a challenging part of the cycle, we've had very easy policy. It's part of what got our economies through the pandemic in such good shape," he said.
"We've now got to get [monetary] policy back towards a level which is more appropriate.
"Celebrating that will be complicated. Ultimately we'll be better off though."
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