By Leith van Onselen Business Spectator's Callum Pickering has written another good article today on a particularly important issue: Australia's growing youth unemployment: Australian society is failing its youth and setting itself up for economic disaster. The persistent rise in youth unemployment will reverberate across the economy for decades to come, potentially reducing productivity and limiting creativity and innovation... The unemployment rate for 15 to 24 year olds has increased significantly since 2008, rising to around 12.5 per cent in February... Since 2008 the participation rate...

By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released new motor vehicle sales for the month of March 2014, which registered a 0.3% seasonally adjusted fall over the month and a 2.8% decrease over the year (see next table). It was the third consecutive monthly decline in sales. Sales in March fell in six states and territories and rose in two. As shown in the below, overall new car sales peaked in the first quarter of 2013 and have since drifted downwards, with even sales of the once booming Sports Utility Vehicles (4WDs) slowing: Looking at the...

By Leith van Onselen Around six months ago, I attended a friend's bucks party in Melbourne's CBD. As bucks nights usually go, we ended up at some seedy bars along King Street, where the night ended around 2 am. As is so often the case in Melbourne, we were unable to find a taxi. Luckily my friend, who is seemingly more technologically savvy than I am, had the Uber app installed on his smart phone and used it to order a town car, which arrived around five minutes later. For those of you that have not heard of Uber, it is a company that has been recently acquired by Google, which links...

By Leith van Onselen Yesterday's dwelling construction data, released by the ABS, revealed a fall in actual completions over the December quarter, but a big pick-up dwelling commencements, which are following approvals upwards. The below chart, presented below in rolling annual terms, summarises the situation well, with approvals and commencements finally beginning to catch-up to the recent strong population growth, with actual completions set to follow later this year: What is most interesting about the current cyclical upswing in housing construction is the extent to which it is...

Westpac has released its March quarter consumer price index (CPI) forecasts, with the bank seeing inflation edging-up to a headline 0.9% QoQ/3.2% YoY (from 0.8% QoQ/ 2.7% YoY) and an underlying 0.7% QoQ/ 2.8% YoY (from 0.9% QoQ/ 2.6% YoY): Our Q1 headline CPI forecast is 0.9%qtr/3.2%yr. Core inflation, as measured by the average of the trimmed mean and weighted median, is forecast to rise by 0.7%qtr/2.8%yr. March is traditionally a seasonally strong month and has historically been worth about +0.2ppts on the CPI. We see this seasonality again this quarter which is part of the reason for the...

David Bassanese has a questionable analysis of house prices this afternoon: As should be clear, house price cycles have differed across states. Relative to average weekly earnings per worker in each state, the peak in Sydney house prices came in 2003, followed by peaks in Hobart, Brisbane and Perth just before the financial crisis in late 2007. Melbourne and Darwin’s peaks did not come until 2010. All up, interest rate driven cycles have tended to be led by Sydney – to be then followed by other States. The resource boom has added an extra dynamic to price trends in Perth, Brisbane and...

By Leith van Onselen  The Australian's Janet Albrechtsen has written a cracking article today attacking the Abbott Government for refusing to free-up competition in the pharmacy industry, which she argues is one of the nation's biggest entitlement racket: So here we are again. A Coalition government is back in Canberra, with the same union-busting, free-market messages in addition to one heck of a new target — ending the age of entitlement. Yet, in a case of deja vu, one union behind one industry in Australia has done a clever job of removing itself from the dartboard of reform... [The]...

Aside from the anti-Midas touch of Mark Rowsthorn, this is worth noting because McAleese's difficulties appear to go to demand as much as ineptitude: The McAleese Group, owner of Cootes Transport, has issued its second profit warning in two months, saying trading in the March quarter has been more difficult than expected due to safety breaches and falling demand for its heavy haulage services. The wholesale sector has been consistently more weak than other sectors in the NAB survey over recent months and has suggested the underbelly of the cyclical bounce was soft. This may also be the result of...

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 rose from –0.15% in February to –0.09% in March. Read...

Capital Economics has produced a little note on China with which I entirely agree. It examines the slowing growth base case, as well as very plausible Chinese hard landing scenarios if reform has a little accident on the way. China’s changing growth model Before getting into what a hard-landing would look like, it is important to stress that this is not how we see things playing out. We expect growth in China to ease over the coming quarters, as policymakers try to strike the right balance between structural reform and supporting short-term growth. Slower growth that is less reliant on...

By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 13 April, which fell for the third consecutive week (down 1.3 points) to be a touch below its long-term average (113.0) and well below the highs reached after last year’s Federal Election: The fall in the week was driven by weakness in consumers’ perceptions of ‘financial situation in the year ahead’ and ‘… a year ago’, with the latter closely correlated with consumer spending. While this sub-index can be volatile, it is now around 5% lower than its average...

Cross-posted from The Conversation: Australia faces a fall in living standards unless policy action is taken. This is due to de-industrialisation and loss of economic complexity. The higher the economic complexity, the stronger the economy’s value-creation prospects. Australia languishes at 79 in global rankings of economic complexity. Modern industry policy could help correct this but is poorly understood. Hence it is frequently maligned in Australia. Any intervention should aim to improve business environments or influence a shift in the economy. The goal should be a structure that...

By Leith van Onselen Prime Minister Tony Abbott has today announced that Badgerys Creek in Sydney's west will be home to the city's second airport, with work on the $2.5 billion project expected to commence in 2016 and reaching full operating capacity within a decade. From The AFR: The federal government will bear some costs with planning but is expected to announce later this week a large investment of its own in roads and other transport infrastructure to service the new airport... Mr Abbott assured the roads would be built before the airport... Mr Abbott said “for more than 50 years...

By Leith van Onselen The AFR's Lucy Kellaway has written an interesting article today calling for the re-introduction of the nine-to-five workday: We start the daily email orgy before we get out of bed in the morning and then pass the hours till dusk in tiresome meetings and video conferences, only to continue to commune with our smartphones late into the night. Every day feels like a marathon, only by the end of it we have hardly covered any distance... Nine-to-five has a long, splendid pedigree and used to work very well. Only in the past 15 years has it fallen out of...

By Leith van Onselen The number of job vacancies in the mining industry have plummeted nearly 23% in the past nine months, according to the latest DFP Mining and Resources Job Index, which provides month-end data for March. The Index dropped 1.9% from February to 77.34 for the month of March 2014 and the number of job vacancies has now fallen 22.66% in the last 9 months. Moreover, permanent employment opportunities have declined the sharpest, down 30% in 9 months (see below chart). Queensland job vacancies have declined the sharpest, down roughly half from June last year (see next...

From the AFR: The federal government is facing demands from China that it be allowed to import workers for projects funded by Chinese investors as part of the free-trade agreement. The government is resisting, saying there would be a severe domestic political backlash should it ever agree. Eager to land the FTA with China, it is looking at ways to target the issuance of 457 visas towards projects that the Chinese want to build and for which the workers and the skills cannot be obtained in Australia. Is it any wonder? Given the huge labour costs in remote projects have played a significant...

From COMMSEC: Figures released from the Reserve Bank show that the average credit card balance rebounded from a 4-year low in February, lifting by $58.70 (1.9 per cent) to $3,205.60. The average credit card balance was still 2.3 per cent below a year ago. In smoothed terms (12 month average) the average balance was down by 2.6 per cent, unchanged on January but slightly down from the 2.7 per cent fall recorded in November (the biggest fall in 19 years of records). Of credit cards attracting interest charges, the average outstanding balance rose by $1.40 in February to $2,246.90. The average...

Anyone reading the weekend papers cannot have missed the great coal whinge that was led by The Australian: THE world’s biggest miners have united in sounding the alarm that Australia’s $60 billion coal sector is under extreme pressure, with global giant Rio Tinto warning the industry is “staring down the barrel”. Harry Kenyon-Slaney, chief executive of Rio Tinto’s energy product group, says the sector is facing a wide range of challenges: lower prices, the strong Australian dollar, high taxes, increasing regulations, delays in gov­­ern­ment approvals and community opposition to...

From Westpac: ― The Westpac–Melbourne Institute Index of Consumer Sentiment edged up 0.3% in Apr from 99.5 in Mar to 99.7. The essentially fl at result leaves sentiment fi rmly around ‘neutral’. ― The flat result was a little disappointing given last month’s reading was clearly impacted by high profi le lay-off announcements. Positive news on jobs and housing could also have been expected to give a lift. Policy infl uences in the month are likely to have been minimal. ― The survey detail showed that improved assessments of family fi nances and the near term economic outlook were...

Cross-posted from The Conversation Governments seem to be enamoured with financial markets, judging by the support they give them around the world to encourage their growth. The assumption seems to be that there’s always a positive relationship between the size of the financial system and its contribution to the economy. This assumption that bigger is always better is one that Australia’s financial system inquiry would do well to test as it considers “how the financial system could be positioned to best meet Australia’s evolving needs and support Australian economic...

By Leith van Onselen The Australian Bureau of Statistics has released Lending Finance data for the month of February, which registered a seasonally-adjusted 0.7% fall in total finance commitments, with the 2.5% fall in commercial finance loans more than offsetting rises in the other broad components. In trend terms, total finance commitments rose by 1.3% in February to be up 25.5% over the year, with increases recorded across all of the four broad components (see next table). The below chart plots total lending in trend terms. As you can see, the volume of lending is fast approaching...

By Leith van Onselen The Age is reporting today that Victorian taxi fares are set to jump by up to 30%, in a bid to improve service and improve driver's incomes: The cost of catching a taxi is set to rise by up to 30 per cent next month after the Napthine government decided to raise fares for the first time since 2008. Exactly how much more passengers have to pay will depend on a range of factors including the time and day of travel and the distance... The size of the increase varies, but will be greatest for short trips and at times of high demand such as Friday and Saturday...

Excerpted from Renai LeMay at Delimiter. Usually once a week or so, I get the chance to catch up with a senior Australian IT industry figure of some kind or another for a detailed chat. It could be a managing director of a major technology vendor or telco, it could be a senior industry analyst, it could be a chief information officer or it could be a politician such as an MP or Senator, or one of their staff members. Usually I do this sort of thing over the phone, but sometimes it’s over coffee. It’s all off the record — usually we’re just shooting the breeze and sharing background...

David Uren today captures the premature jobs celebration that has taken hold of the nation's more flighty analysts: STRONG jobs growth has raised hopes that unemployment has passed its peak and puts pressure on Treasury to revise up pessimistic growth assumptions behind next month’s budget. ...the strength...bodes well for the nation and suggests that the coming fall in resource investment could be managed without significant disruption. “The handover from the ­resource sector to the rest of the economy is happening and that will bring a regional switch in where the growth is,”...

From Callam Pickering at Business Spectator: Month after month, the market incorrectly assesses the labour market because they focus on the wrong data. The Australian Bureau of Statistics makes it very clear that the trend data is more reliable than the seasonally-adjusted estimates. Using the seasonally-adjusted data, the ABS is 95 per cent confident that employment growth was somewhere between a 39,000-person fall and a 76,000-person rise during March. They are also 95 per cent confident that the unemployment rate was somewhere between 5.2 and 6 per cent. Wide confidence intervals are a...

Weeoo, weeoo, weeoo.  Go long the IMF: I give up – what’s with the International Monetary Fund publishing an out-of-date forecast for the Australian economy? Has the shadow of official Joe Hockey gloom fallen over its Washington headquarters? As it was summarised by the AFR, the IMF officially reckons the Australian “economy is likely to remain in the doldrums this year and next” with GDP growth of 2.6 per cent in 2014 and 2.7 per cent in 2015, according to the forecasts released on Tuesday night. Excuse me – the Australian economy is in the doldrums? That’s not what the...

Cross-posted from The Conversation One of the major recommendations made by the 1997 Wallis Inquiry into banking was to establish a prudential regulator for the financial sector separate from the Reserve Bank of Australia. The new regulator, APRA, became the prudential regulator for banks, superannuation funds and insurers. APRA’s subsequent track record has been mixed. There have been two major regulatory failures, the collapses of HIH and Bankwest. On the other hand APRA is usually given an important part of the credit for the robustness of the Australian financial system during the...

By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released labour force data for the month of March, which registered a 0.2% decrease in the headline unemployment rate to 5.8%. The result beat analyst’s expectations that unemployment would rise to 6.1%. However, trend unemployment actually increased marginally to 6.0%. Total employment increased by a seasonally adjusted 18,100 jobs in March, with the 22,100 decrease in full-time jobs more than offset by a 40,200 increase in part-time employment. Aggregate monthly hours worked also increased by 8.0...

The Australian Bureau of Statistics has just released its Labour Force survey for March and the result is another consensus buster, which was expecting 2,500 jobs and got: Employment increased 18,100 to 11,553,200. Full-time employment decreased 22,100 to 8,029,100 and part-time employment increased 40,200 to 3,524,000. Unemployment decreased 29,900 (4.0%) to 713,200. The number of unemployed persons looking for full-time work decreased 16,700 to 509,800 and the number of unemployed persons only looking for part-time work decreased 13,300 to 203,400. The unemployment rate decreased 0.2...

Fresh from Westpac: Trimmed mean consumer inflationary expectations is rising again, 2.4%yr in Apr from 2.1%yr in Mar, from a 2.3%yr print in Feb and Jan. Expectations are now in a modest uptrend from the equal record low print of 1.5%yr in Sep 2013. The trend trimmed mean was 2.3%yr in Apr & Mar, 2.2% in Feb and 2.1% in Jan. The trend is edging closer to the recent peak of 2.4%yr in May 2013. The median expectations for managers & professionals bounces in Apr, from 2.0%yr to 2.4%yr, with an eye on the rent highs of 2.9%yr in Feb and 2.6%yr. Median expectations for managers were lower...

By Leith van Onselen Former senior public servant, Gary Sturgess, has raised concern today about the declining role of the public service, whose influence has been eroded, leading to a raft of poor policy outcomes. From The Canberra Times: [Modern public servants are] outgunned by well-staffed ministerial offices looking for solid direction amid the onslaught of the 24-hour media cycle... ‘‘Some people have said to me the public service has given up the field,’’ he said. ‘‘There is a role to play in making sure ministers don’t rush ahead and act contrary to the public...

The rampant Australian dollar took out 94 cents (well, 93.97!) last night as the Fed minutes hosed the hawks: In their discussion of monetary policy going forward, participants focused primarily on possible changes to the Committee's forward guidance for the federal funds rate. Almost all participants agreed that it was appropriate at this meeting to update the forward guidance, in part because the unemployment rate was seen as likely to fall below its 6-1/2 percent threshold value before long. Most participants preferred replacing the numerical thresholds with a qualitative description of the...

By Leith van Onselen The Australian Industry Group's (AIG) Innes Willox has posted an article today in The Australian warning that Australia should take its time negotiating a "free trade agreement" (FTA) with China, in order to maximise potential benefits from the deal and minimise downside risks: The potential economy wide benefits of an Australia-China free trade agreement are enormous. But so are the downsides if our negotiators are rushed by deadlines or are supine in their response to Chinese demands. Australia’s history of securing benefits from free trade agreements is mixed at...

The Department of Employment has today released its Monthly Leading Indicator of Employment, which registered a 0.064pt fall in April – the sixth consecutive monthly fall (see next chart). The Indicator is supposed to anticipate movements in the growth cycle of employment via a composite index of four weighted series (ANZ Newspaper Job Advertisements, Dun and Bradstreet Employment Expectations, the Westpac-Melbourne Institute Leading Index of Economic Activity and the Westpac-Melbourne Institute Consumer Sentiment Index), which are statistically ascertained to lead employment growth over...

Here's the Kouk yesterday: The favourable news on the economy is unrelenting. After the flood of extremely positive news last week, there has been further reinforcement of the clear upswing in a couple of series released in the last day and a bit. Yesterday saw the number of job advertisements, as measured by the ANZ, lock in five straight months of increase in trend terms. There is now no doubt that employment growth will also lift in the months ahead and the unemployment rate will start to fall very soon. Adding to the news of decent growth is today's report of NAB's measure of business...