Detailed labour force; Consumer confidence
- Regional unemployment: Last week we highlighted where we could be doing better in reducing unemployment across different age groups. This week we focus on the regions. The regions with the highest unemployment rates are dominated by Queensland and Western Australia. The regions with the lowest jobless rates can be predominately found in NSW, ACT and Victoria.
- Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.2 per cent to 118.6 points. Consumer sentiment is above both the short-term average of 114.4 points held since 2014 and the longer term average of 113.1 points since 1990. The four-week moving average for family finances over the next year rose to 28.2 points – the highest level since February 26 2017.
The detailed job data can influence interest rate policy and government spending decisions. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
What does it all mean?
- The Reserve Bank Governor said that we can do better on unemployment and shouldn’t be satisfied with a jobless rate near 5 per cent. When he made that statement he wasn’t really thinking about Sydney and Melbourne – unemployment remains low in many of the regions in our largest capital cities. But looking at the highest jobless rates in the land, Queensland and Western Australia regions dominate. Six of the 15 regions with the highest jobless rates can be found in Queensland with four of the regions domiciled in Western Australia.
- Of the 15 regions with the lowest jobless rates, 10 regions can be found in NSW with four in Victoria and the remainder in the ACT.
Of Australia’s 87 SA4 regions, 40 of the regions have jobless rates below 5 per cent. At the other end of the scale, 26 regions have jobless rates of 6 per cent or above. - Job security is a key driver of consumer confidence. But sentiment towards current family finances is arguably a more important determinant of consumer spending. In fact, growing expectations for interest rate cuts, continued low inflation and better sentiment towards the housing market boosted consumer views on their current finances last week. The four-week moving average of the future family finances sub-index rose to more than two-year highs.
What do the figures show?
Regional unemployment
- Unemployment rates were assessed across the 87 SA4 regions where data is available from the Australian Bureau of Statistics (ABS). Data is available up to April and rolling annual averages were used for assessment to adjust for seasonality. In the year to April the highest unemployment rate could be found in the Queensland Outback (14.0 per cent), followed by Moreton Bay North (Qld 9.4 per cent) and Coffs Harbour-Grafton (NSW 8.2 per cent).
- Lowest unemployment rates could be found in Sydney-Sutherland (1.9 per cent), Sydney-Northern Beaches (2.5 per cent) and Sydney-Inner West (2.8 per cent).
- If the latest unemployment rates are compared with ‘normal’ levels (decade averages), 58 regions have jobless rates that are below ‘normal – or better than the ‘average’ experience. Again, NSW and Victorian regions dominate the list but the average jobless rate in Cairns for the year to April was 4.8 per cent – over 36 per cent lower than the decade average of 7.6 per cent.
- At the other end of the scale, the 6.2 per cent jobless rate in Darling Downs-Maranoa was almost 68 per cent above the decade average of 3.7 per cent.
Consumer Sentiment
- The weekly ANZ-Roy Morgan consumer confidence rating rose by 1.2 per cent to 118.6 points. Consumer sentiment is above both the short-term average of 114.4 points held since 2014 and the longer term average of 113.1 points since 1990.
- Four of the five major components of the index rose last week:The estimate of family finances compared with a year ago was up from +9.1 points to +10.4 points;
- The estimate of family finances over the next year was up from +29.1 points to +30.1 points;
- Economic conditions over the next 12 months was up from +7.3 points to +10.5 points;
- Economic conditions over the next 5 years was up from +11.7 points to +16.7 points;
- The measure of whether it was a good time to buy a major household item was down from+29.0 points to +25.3 points.
- The measure of inflation expectations fell from 4.0 per cent to 3.8 per cent.
What is the importance of the economic data?
- The Australian Bureau of Statistics (ABS) provides detailed labour market figures one week after releasing ‘top level’ statistics of employment & unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy.
- The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
What are the implications for interest rates and investors?
- Rate cuts can only do so much in stimulating the economy and getting the jobless rate down. Arguably one or two rate cuts may only have a modest effect in lifting economic growth given that rates are already historically low.
- State and Federal Governments must continue to focus on infrastructure spending and population policies to lift economic momentum more broadly across the country. Fortunately with state and federal budgets generally in good shape, fiscal policy can be directed to job creation rather than fiscal consolidation.
- Increased spending on infrastructure is positive for a raft of industry sectors such as developers, retailers and building material suppliers.
- Aussie consumers are content for now. Unemployment, interest rates and inflation all remain low. Political uncertainty has been removed following the Federal election. Tax cuts are coming. A new train line has opened in the Hills District of Sydney. The housing market is showing tentative signs of stabilisation. The Aussie sharemarket (S&P/ASX200 index) is a global outperformer, lifting by almost 2.6 per cent so far in May. But next week’s March quarter economic growth data may underwhelm.
- CommSec expects a rate cut to be delivered in June while another could occur in August. Low inflation, modest wage growth and an uncertain consumer backdrop means an extended period of record low interest rates.
