Australian Economy

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We’ve reached peak mining employment

Mountain_Climber_Scaling_Peak_10950000837 Cross posted from Peak Jobs Analysis by Shane Granger I am going to commence with a prediction. Australia reached its Peak Jobs Mining moment in May 2012 when the industry recorded a total workforce of 275,500. The more than 10% decrease in mining employment in the most recent ABS update to 237,400 gives the first clear indicator that the sector is looking to return to a >200,000 labour force, not seen since November 2010 and faster than previously expected. The month of September 2014 was a bad one with another 2,500 jobs lost. This is the third month, out of the previous four where more...
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Engineering construction hits mining cliff

ScreenHunter_08 Nov. 07 08.52 By Leith van Onselen The ABS has released engineering construction data for the June quarter of 2014, which revealed a 2.0% seasonally adjusted fall in the value of work done over the quarter, and a reduction in the construction pipeline. According to the ABS, the total value of engineering construction in real seasonally-adjusted terms fell by 2.0% in the June quarter and was down by 3.8% over the year, with both the private (-1.6%) and public (-3.5%) sectors falling over the quarter (see below chart). You can see the big uplift in activity from 2003 as the commodity price boom...
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Retail sales disappoint in August

ScreenHunter_02 May. 25 22.30 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released retail sales figures for the month of August, which registered a 0.1% seasonally-adjusted rise in sales over the month, well below economist’s expectations of a 0.4% increase. Annual sales growth clocked in at a solid 5.1%: The below chart maps out seasonally-adjusted sales growth by state on a monthly and annual basis: At the state and territory level, positive monthly retail sales growth was recorded in Victoria (+0.7%), Western Australia (+0.1%), and the Northern Territory (+1.7%), whereas sales...
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Chief scientist strikes appropriate balance on CSG

ScreenHunter_76 Oct. 01 10.14 By Leith van Onselen The New South Wales Chief Scientist, Mary O'Kane, last night delivered her Final Report of the Independent Review of Coal Seam Gas Activities in NSW, which apears to have struck an appropriate balance between the economic opportunities of CSG and health and environment concerns. The report, which is based on 19 months of investigation, found that most risks to health and the environment from CSG can be managed, although "unintended consequences" are also inevitable, due either to natural disasters, human error, or accidents, which necessarily requires that CSG activities...
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Manufacturing recession deepens

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen The Australian Industry Group (AIG) has released its Performance of Manufacturing Index (PMI) for September, which revealed an accelerating contraction in manufacturing activity, with the index declining by 0.8 to 46.5 (a score below 50 means that activity is contracting): - Respondents to the Australian PMI® indicated that despite a welcome depreciation in the Australian dollar since early September, it remains high and continues to support intense import competition and weigh heavily on exports. The winding down of Australian automotive assembly and the ongoing...
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Asia’s industrial production shocker

chinatoyfactory01 by Chris Becker Some more troubling news on the export front for Australia as an Asian regional slowdown seems underway, with Japan and South Korea reporting some woeful stats this morning. The August print for Japanese industrial production came in well under expectations at -2.9% year on year and coupled with a core CPI read that is hovering just above 1%, it pays to ask the question if Abenomics is actually working. More from David Scutt at Marketscuttlebutt: South Korea logged a monthly decline of 3.8%, the sharpest contraction seen since December 2008, with the annual rate sliding...
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ANZ-RM consumer confidence rises above average

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose in the week ended 28 September, up 0.8 points (0.7%) to 113.7, taking it just above its long-run average reading of 113.2 (see next chart). As usual, ANZ chief economist, Warren Hogan, talked-up the result, saying that the ANZ still believed “household spending will grow moderately this year", seemingly summoning the confidence fairy and wealth effect from rising housing prices, even though wages are falling in real (inflation-adjusted) terms. The below chart plots the most recent Westpac-Melbourne...
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Why Chris Pyne is wrong on youth unemployment

ScreenHunter_29 Aug. 22 11.42 By Leith van Onselen Education Minister, Christopher Pyne, appeared on the ABC's Q&A program last night and showed why he is out-of-touch on the issue of youth unemployment, declaring that there is "no crisis". From The Age: Q&A host Tony Jones asked whether the Coalition should place youth unemployment on a "crisis agenda to try and fix this?" "There isn't a crisis. There certainly is an emphasis from the Coalition on young people either learning or earning so when they leave school – and happily more people are finishing year 12 which gives them a better chance of getting a job...
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RM inflation expectation lowest in 2014

ScreenHunter_05 Mar. 12 11.39 By Leith van Onselen Roy Morgan Research (RMR) has released its inflation expectations survey for August, which revealed that consumers' inflation expectations over the next two years fell by 0.2% to 4.8% per year in August - 0.2% down from a year ago and the lowest result recorded so far in 2014: According to the media release: Analysis by State shows inflation expectations were driven lower by falls in five out of the six Australian States: New South Wales (5.0%, down 0.3%), Queensland (4.9%, down 0.1%), Western Australia (5.3%, down 0.4%), South Australia (4.3%, down 0.7%) and...
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Who needs science when you have dirt?

371_think by Chris Becker I really hate bad news - to the point that I pointedly do not watch any regular news or read the mainstream dailies (especially the terrorism mongers at Newscorp). There is an amazing amount of positive informative things happening around the world all the time - especially in exciting fields of biotechnology, communications, materials science and my favourite space exploration and aerospace in general. Unfortunately you've got to call a spade and spade and use said shovel to hit people over the head with the injustices and plain stupidity of their elected officials. Especially when...
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RBA: Low dollar no saviour for manufacturing

ScreenHunter_20 Feb. 20 10.06 By Leith van Onselen More arse covering from the RBA today, this time arguing that a lower dollar could not have saved Australian manufacturing. From The Canberra Times: A lower exchange rate would not have helped manufacturing during the mining boom, according to modelling conducted by the Reserve Bank... But the Reserve Bank paper, Exchange Rate Movements and the Australian Economy, suggests that fixing the dollar at 2003 levels - around 60 US cents – would have made little difference. "Even a constant nominal exchange rate would not have prevented the ongoing decline in the relative...
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PIMCO dares to suggest lower growth ahead

looking ahead by Chris Becker One of the world's largest funds with nearly $2 trillion under management, PIMCO, recently gave its views on the global economy and specifically China and Australia, downgrading growth forecasts for each, well below the consensus view. Here are some excerpts from their site: With ongoing growth slowdowns in China and Japan, the region’s two biggest economies, our forecast is for lower growth for Asia as a whole. The Chinese slowdown had the most influence on our forecast. The high frequency data has not been particularly good over the last few months, and after our...
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Australian mortgage debt hits all-time high

ScreenHunter_31 Sep. 02 16.36 By Leith van Onselen The RBA released its quarterly household balance sheet statistics on Friday, which revealed that Australian mortgage debt hit the highest level on record in the June quarter when measured against household disposable income. According to the RBA, the ratio of housing debt hit a whopping 137.1% in June, up from 136.1% in March and 5% above the pre-GFC peak of 132.1% (see next chart). Total household debt rose to 151.1% in June, up from 150.2% in March, but remains 1.8% below the 152.9% all-time high reached in September 2006 (see next chart). When compared...
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Why students should not pay more for higher education

ScreenHunter_26 Oct. 16 10.41 By Leith van Onselen Fairfax Media has done some nice work today, analysing the OECD's Education at a Glance Report (summarised here) and finding that the public rate of return from higher education is around twice that of the individual, even though students in Australia shoulder most of the cost: The public rate of return from tertiary education in Australia is twice the rate of return to the individual, a Fairfax Media analysis of figures from the Organisation for Economic Co-operation and Development shows. The data measures the return on investment based on taxes and other financial...
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Public sector golden handshakes blow-out by 100%

ScreenHunter_4395 Sep. 26 11.03 By Leith van Onselen The Canberra Times is reporting today that the redundancy bill for Australia's federal public servants blew-out to $580 million in 2013-2014 - more than double the forecast $273 million in the May Budget. It's not all bad, however, with public service wage costs falling by more than $700 million from the May Budget's forecast: The Final Budget Outcome reveals the Commonwealth's "wages and salaries" bill for 2013-2014 was $18.8 billion against a prediction in May of $19.5 billion, probably reflecting several years of efficiency dividends, redundancies and other...
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Shock horror: mining wages are too high

i_want_the_truth by Chris Becker It's hard not to stifle a laugh, but then hang your head when you read headlines like this:  Inconvenient truth: Australian mining wages too high Japanese trading giant Mitsui says Australia's lagging productivity fails to justify its high mining wages, while tipping a modest rebound in heavily depressed iron ore and coal prices by the end of the year. Mitsui Australia boss Yasushi Takahashi stressed the importance of ­executing deeper cost cuts at Mitsui's Australian operations, which include iron ore, coal, and liquefied natural gas. "It's an inconvenient truth but...
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WA kicks Budget can with massive asset fire sale

ScreenHunter_2966 Jun. 24 15.17 By Leith van Onselen With the Western Australian finances in disarray following the "unexpected" slump in the iron ore price, which threatens to blow a $1.5 billion hole in the State Budget, the State Government has resorted to tried and true method of flogging-off the states' assets. As reported in Business Spectator today, the Western Australian Government plans to offload 20 assets in a bid to pay down the states' crippling debt: Assets listed include Fremantle Police Station, parts of the Police Headquarters in East Perth, the East Perth Power Station and land around the Cottesloe School...
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High Aussie dollar could double unemployment

ScreenHunter_4388 Sep. 26 06.21 By Leith van Onselen Dr Janine Dixon of Victoria University’s Centre of Policy Studies yesterday presented modelling on the effects on incomes and jobs of the Australian dollar remaining at around its present level for a further two years to the Melbourne Economic Forum. According to this modelling, reported today in The AFR, unemployment in Australia could double if the Australian dollar does not fall significantly from its still high level of $US0.88: Dr Dixon’s modelling suggests that failure to let the dollar fall in an orderly manner would result in unemployment surging to 12 per...
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NSW’s population booms as WA’s growth winds-back

ScreenHunter_4368 Sep. 25 12.53 By Leith van Onselen The ABS has released its Australian demographic statistics for the March quarter of 2014, which revealed that Australia's population growth rate continues to fall, driven by declining growth in the two key mining states of Western Australia and Queensland. According to the ABS, Australia’s population grew by 1.69% in the year to March 2013 - the fifth consecutive quarterly decline in growth - albeit population growth remained well above the 30-year average of 1.4%. The growth in the number of persons in the year to March 2014 was 388,300, which was still 130,399...
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Recovery in ABS job vacancies stalls

ScreenHunter_4363 Sep. 25 11.24 By Leith van Onselen The Australian Bureau of Statistics (ABS) has released job vacancies data for the August quarter, which recorded a 1.2% trend increase over the quarter, but a slight fall in seasonally adjusted terms: ◾Total job vacancies in August 2014 were 147,200, a trend increase of 1.2% from May 2014. ◾The number of job vacancies in the private sector was 134,600 in August 2014, a trend increase of 0.6% from May 2014. ◾The number of job vacancies in the public sector was 12,600 in August 2014, a trend increase of 8.8% from May 2014. Unfortunately, due to budget cuts,...
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RBA’s Mr Rainbow lashes economic “doom-mongers”

ScreenHunter_4362 Sep. 25 10.21 By Leith van Onselen There's no stopping the RBA's Mr Rainbow, John Edwards, who has assumed the role left by "boom boom" Ric Battellino in talking-up the Australian economy. Edwards came out swinging overnight, lambasting the "economic doom-mongers" - past and future. From Nikkei.com: The truth, however, is that the Australian economic story is both more interesting and more nuanced than the widely reported view that the so-called lucky country is spiraling into a slump after the supposedly fat and complacent years of the mining boom. For one thing, the mining boom in Australia has not been...
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Why Australia should charge for road use

ScreenHunter_4360 Sep. 25 08.08 By Leith van Onselen The Australian's David Uren is today pushing the case to charge motorists directly for road usage, after the issue was once again brought to the fore in the Harper review draft report into competition policy: The arguments on road pricing are fairly straightforward. At present, motorists are taxed with fuel excise when they fill their tanks, annual motor registration fees, stamp duties when they sell their cars and, for those with expensive tastes, a luxury-car tax. Apart from the occasional road toll, none of these levies, which raise around $25 billion a year, bears any...
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GS sees light over capex cliff

Thelma_Louise_cliff-1 by Chris Becker Goldman Sachs has an interesting research note out going over the 2nd quarter Australian GDP data with a very positive spin: While the 2Q2014 GDP data showed annual growth decelerating to 3.1% yoy from 3.4% yoy and domestic demand remaining subdued (1.4% yoy), we believe there were three positive undertones: 1) we estimate the non-mining economy to be now growing at 2.7% yoy – the fastest since 4Q2007; 2) labour productivity growth continues to improve, capping unit labour costs; and 3) there has been a modest lift in household income growth despite depressed wage...
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RBA warns on property, flags macroprudential

ScreenHunter_30 Oct. 10 06.15 By Leith van Onselen In today's Financial Stability Review, the Reserve Bank of Australia (RBA) gave its strongest indication yet that it (along with APRA) would introduce macro-prudential controls on high risk mortgage lending. Below are the key extracts from the report, with the final sentence seemingly flagging targeted macro-prudential measures (my emphasis): The low interest rate environment and, more recently, strong price competition among lenders have translated into a strong pick-up in growth in lending for investor housing – noticeably more so than for owner-occupier housing or...
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BREE lowers its commodity price dartboard

dartboard by Chris Becker The Bureau of Resources and Energy Economics (BREE) has released its quarterly report today and it makes for some interesting -  if still somewhat optimistic - reading. First of all, BREE has slashed its forecast for iron ore to $USD94 for the rest of the year (its currently $USD90 over the quarter), falling from $USD107 in its last report in June. They've gone the safe route and penciled a similar figure for the rest of next year, and gone even safer by expecting a semi-permanent plateau between $90 and 95 - which of course is delusional given the real factors at work here,...
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