Australian Economy

Viewing posts in the Australian Economy category

External shock as I wave you goodbye!

imgres Rebar futures are down 60 points or 2.2% to 2716 today and Dalian iron ore ore futures are down 17 points or 3% to 576. These are big moves and markets have closed almost on their lows. From Reuters: "There is no sign that demand for steel can improve in the short term," said Cao Bo, analyst at Jinrui Futures in Shenzhen, citing the prolonged weakness in China's housing sector. China's home prices fell for a fourth straight month in August, data showed on Thursday, pointing to a deepening downtrend in the country's property market that is weighing on the broader economy. Real estate, along...
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Charting the city-country employment divide

ScreenHunter_4299 Sep. 18 17.04 By Leith van Onselen Yesterday, the Australian Bureau of Statistics (ABS) released its detailed monthly labour force statistics, which includes breakdowns of employment and unemployment across Australia's capital cities and regions. According to this release, the unemployment rate in Australia's capital cities was 5.7% in August in raw terms, down 0.1% from July. By comparison, unemployment in Australia's rural and regional areas was 6.5%, which was unchanged from July. The below chart, which is presented on a rolling 12 month average basis to smooth volatility, illustrates the trends in...
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The death of Australian manufacturing

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Following on from my earlier post summarising the latest quarterly employment report from the ABS, below are some charts illustrating the dire situation facing Australia's manufacturing industry. First, total employment in manufacturing fell to the second lowest level ever in August, with only 919,100 Australians employed in the industry - just a whisker above the all-time low 916,900 jobs recorded in May 2013. Moreover, the share of total employment in manufacturing fell to an all-time low of just 7.9% - less than half the 16.8% of total employment in manufacturing in...
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Where are the new jobs and where are they gone?

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released its quarterly labour force report, which breaks-down employment at the industry level. Below are some key charts, which present the changes in employment aggregates on a trend basis. First, the quarterly change in employment by industry: As you can see, science (+21,900) and construction (+13,900) were the big employment gainers over the August quarter, with mining (-13,100) and manufacturing (-11,000) the biggest losers. Public servant jobs also declined by 9,900 over the quarter, possibly reflecting...
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Will a falling AUD curb the population ponzi?

ScreenHunter_277 Nov. 14 12.57 By Leith van Onselen Rob Burgess has written an interesting post today at Business Spectator, which contends that a falling Australian dollar would curb immigration into Australia by reducing the pay-off from earning Australian dollars and raising living costs: Australia has been a very attractive destination for skilled workers from around the world, including developed nations such as the UK and US. Recruiting in such markets relies on several factors, but key among them is the ‘lifestyle’ that temporary migrants will enjoy and the remuneration paid in sky-high Australian...
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Why are governments so deluded about commodity prices?

Schlaegel_und_Eisen_nach_DIN_21800.svg One the more enduring features of the post-GFC political economy is the delusion that has taken hold our political elite when it comes to the usefulness of commodities. We have just sailed through an era when our macro managers decided it was a good idea to increase via strucutral adjustment  Australia's external exposure to volatile commodity prices. The hallmark of the same era was faith in endless Chinese demand that has now dried up and blown away like doggy dirt dried up in the sun. Time and again we are seeing forecasts for crucial commodity inputs into national welfare that don't bear...
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Who’d want to be an engineer right now?

ScreenHunter_05 May. 15 10.45 By Leith van Onselen If I was to pick a skilled occupation to avoid right now, it would be engineering. My Father and brother-in laws are both engineers working in mining-related areas. And through them, I also know a bunch of other engineers. For the past decade I have watched with amazement as their work boomed and huge pay rises flowed as the biggest commodity price and mining investment boom since Federation arrived on our shores. The story today has changed immensely. Engineering design work has all but dried-up. There's still construction and maintenance work, but these too are...
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Netflix enters Australia with exclusive rights deal

ScreenHunter_4272 Sep. 17 14.43 By Leith van Onselen Fairfax is reporting today that Netflix is poised to enter the Australian streaming market, locking-up an exclusive deal to screen the new TV series Gotham: Providing the biggest hint yet that Netflix is preparing to launch locally, the US-based company has secured exclusive Australian subscription video on-demand rights to the highly anticipated superhero television series Gotham... By acquiring subscription video on-demand (SVOD) rights from Time Warner's Warner Bros, Netflix is giving its biggest sign yet that it intends to launch in Australia. Nine Entertainment...
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Leading index down again

Li From Westpac, the six month annualised deviation from trend growth rate of the Westpac Melbourne Institute Leading Index which indicates the likely pace of economic growth three  to nine months into the future fell from –0.75% in July to –0.90% in August: This is the seventh consecutive month where the growth rate in the Index has been below trend. The index continues to indicate that we can expect growth in the Australian economy to stay below trend in the second half of 2014 and into 2015. That view is consistent with the revised forecasts recently released by the Reserve Bank of...
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Immigration policy sells-out local accountants

ScreenHunter_4248 Sep. 17 07.26 By Leith van Onselen The AFR has published an article today on the jump in overseas students studying accounting, which has driven local students from the field: A 40 per cent jump in new overseas postgraduate accounting students in 2013 was the sole driving force in the critical tertiary accounting education market, as local students continued to shun the field. International students now ­dominate accounting courses, making up a record 79 per cent of the 17,600 enrolled postgraduate students in 2013, according to data from the federal Department of Education. At the undergraduate...
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Competition policy tsars slam online piracy crackdown

imgres By Leith van Onselen Two senior competition policy tsars - former ACCC head, Alan Fels, and former chair of the 1999 Australian Intellectual Property and Competition Review Committee, Henry Ergas, have lodged a joint submission to the Government warning that Australians would likely pay more to legally download music and movies, with the bulk of the revenue flowing offshore, if the Government's proposed measures to prevent online piracy are implemented, while also warning that the costs of the measures "greatly exceed their benefits": The report finds that the implications of the Government’s...
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WA mining and resources jobs crash

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen DFP Recruitment has released its mining and resources jobs index, which registered a 5.4% fall in August - the fourth consecutive monthly fall - with the index also down 9.9% over the quarter and by 34% over the year. Western Australia has also led the decline: The rate of decline seen over the past 12 months is concerning for all engaged within the industry. The iron ore price has recently hit 5 year lows exposing a number of the higher cost producers and we are continuing to see deeper cost cutting measures introduced. The repeal of the mining tax has been well...
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Youth underemployment rockets to all time highs

ScreenHunter_3946 Sep. 01 12.43 By Leith van Onselen Following last week's labour force figures for August, I posted an article showing that unemployment for Australians aged between 15 and 24 had risen to 13.8% in trend terms - the highest youth unemployment rate since November 2001 (see next chart). I also showed that total employment growth for those aged 15-24 years of age has been more or less negative since the Global Financial Crisis (GFC), whilst the rest of the labour force has experienced positive growth (see next chart). With full-time jobs having been hit particularly hard, partly offset by an...
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Hockey cheers on housing bubble

imgres From Sydney Morning Domain: Federal Treasurer Joe Hockey has again dismissed the idea that a property bubble is forming in Australia, saying that rising prices were just a reaction to lack of supply. Echoing the thoughts of many private sector economists and bankers in the country, Mr Hockey said the idea that households and investors were taking on too much debt to buy houses was wrong. "I'm not so sure it's credit fuelled," he said during a seminar in Sydney. "There's a lot of cash going into property now." "Australia fundamentally doesn't produce enough houses to meet demand," the...
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ANZ-RM consumer confidence falls below average

ScreenHunter_20 Apr. 10 19.28 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index fell in the week ended 14 September, down 2.0 points (1.7%) to 111.3, taking it too the lowest level in five weeks and below its long-run average reading of 113.2 (see next chart). This week's fall was driven by “declines in ‘time to buy a major household item’ (-5.1%) and ‘financial situation compared to a year ago’ (-3.7%)”. The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the ANZ-RM Consumer Confidence index: As you can see, the mood...
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Westpac: Business lending softening

url48 From the AFR: Westpac Banking Corporation says commercial lending growth has softened in recent months and a sharp recovery in the sector is unlikely, as many business owners hold off on big investments. In a sign of the caution among business people, head of commercial lending, Alastair Welsh said business credit growth had slowed in the second half as customers focused on improving their balance sheets. He said the annualised pace of growth had slowed over the past few months as many business customers were “reluctant” to make investment decisions, or were paying down...
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“Mad Adam” on the income boom!

imgres "Mad" Adam Carr has once again entered bizarro world today with another post lashing "doomsayers"for being concerned about Australia's falling national income growth and soggy outlook: What could drive such an emotionally charged dystopian view of the economy? The main culprit is the mistaken view that national income is falling, driven by the slump in the terms of trade. It lies at the heart of this doomsday cult that seems to be running Australia and it stands behind the constant call to slash wages and cut the exchange rate. Presumably because the only way to lift national income is by cutting...
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Why raising education levels pays big dividends

ScreenHunter_26 Oct. 16 10.41 By Leith van Onselen The OECD has released its latest Education at a Glance Report, which contains some very interesting benchmarking data on education-related matters. Below are some of the key charts from the report, which basically show that education is a great investment from both a private and public perspective. First, consider the proportion of the working age population that attained tertiary education in 2012 versus 2000. As you can see, Australia ranks well on this measure, easily beating the OECD average and achieving a big lift in educational attainment over the 12-year...
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Piracy wars heat up

ScreenHunter_4208 Sep. 15 13.48 By Leith van Onselen AFR Sunday included an interesting segment yesterday (above) on the diverging opinions on internet piracy, with content providers and incumbents coming to blows with internet service provider (ISP) iiNet over the best way to deal with the issue. The incumbents, like Village Roadshow and Foxtel, who want to maintain their current business models (and profits), are lobbying hard to make ISPs police internet users and enforce copyright, whilst also expecting them to wear the cost of stamping-out piracy. By contrast, iiNet has hit back, saying "there are big costs...
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The elder Aitken nails Australia

imgres From the AFR: James Aitken, the elder brother of high profile stockbrokers Charlie and Angus, has been consulting to some of the world’s largest investment funds and policymakers via his firm Aitken Advisers since leaving UBS in 2008. Before that he worked at insurer AIG at its infamous derivatives unit. ...In China, all is not as it appears, says Mr Aitken, whose analysis Notes from a Small Island is despatched to his exclusive and still growing list of the world’s most sophisticated investors and policy makers. “People are getting ‘head faked’ by the slow down in credit growth...
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New car sales continue to fall

ScreenHunter_01 Apr. 17 11.28 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released new motor vehicle sales for the month of August 2014, which registered a 1.8% seasonally adjusted fall in the number of sales, and a 3.5% decrease over the year (see next table). Sales in July fell in all jurisdictions except the South Australia. As shown in the below, new car sales continue to trend down, with the trend series declining since November 2012. That said, sales of Sports Utility Vehicles (4WDs) continue to increase, although this has been more than offset by weakness in the other...
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Employee share reforms will foster innovation

ScreenHunter_4199 Sep. 15 09.24 By Leith van Onselen The Australian has reported today that the Abbott Government intends to reform the way that employee share schemes are taxed in a bid to foster start-ups and innovation. From The Australian: Employee share schemes will be a key part of [Coalition] policy by offering help to start-up companies that want to lure good staff with the offer of stock options. This is impossible for some under existing laws that require staff to pay tax on the shares when they receive them rather than when they sell them. The share schemes will only be available to small companies, limiting the...
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Sell Australian property

Twilight_Anvil3_498 The mainstream media is going through something of an awakening today. There are lots of little pieces attempting to determine what the crash in Australia's terms of trade means but none asks the question that matters above all else: will the iron ore crash take down housing? My view is that it will but it will take a while. As I wrote last week the fallout for the economy will be nasty: Corporate profits and cuts The lion’s share of iron ore profits are shared between three firms: BHP, RIO and FMG. BHP estimates that for every $1 fall in the iron ore price it loses $135 million in profit....
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Red Book: One nervous consumer

hjkty Westpac's September Red Book is out and is unhappy reading for those expecting a renewed consumer boom to drive economic growth. Here are the crucial charts: ― The Westpac–Melbourne Institute Index of Consumer Sentiment fell 4.6% in Sep reversing most of the recovery from May’s post-Budget fall. At 94.0, the Index is back in ‘cautiously pessimistic’ levels, 5.8% below the ‘neutral’ level that prevailed immediately prior to the Budget. ― Consumer views on the economic outlook recorded particularly large falls in Sep, the sub-index tracking 12mth expectations declining 8.2%...
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Worley Parsons peeks over mining capex cliff

ScreenHunter_37 May. 14 23.23 By Leith van Onselen Projects engineering firm, Worley Parsons, has today warned that the pipeline of resource projects in Australia is diminishing fast, leaving a large void of work for those involved in mining construction. From The Australian: In an interview at Bank of America Merrill Lynch’s Australian Investment Conference in New York, WorleyParsons chief financial officer Simon Holt indicated Australia was nearing an end of a massive wave of energy investment as giant developments move closer toward completion. “Australia has come off some pretty big projects and (while) there’s...
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