Record wealth. Job vacancies ease. Foreign holdings of Aussie shares hit 6½-year high

From

Financial Accounts; Job vacancies; Employment by Industry

  •  Wealth: Total household wealth (net worth) rose by 1.6 per cent to a record high $10,455.3 billion in the June quarter after rising by 0.2 per cent to $10,289.6 billion in the March quarter. Over the year to June, net worth rose by 0.5 per cent.
  • Per capita wealth: In per capita terms, wealth rose by $4,965.8 in the June quarter to $411,491.7 following a $1,512 decline in the March quarter, arresting three consecutive quarters of declines.
  • Job vacancies: Job vacancies fell 1.9 per cent in the three months to August. Vacancies are also down by 1.9 per cent on a year ago – the biggest annual decline in 5½ years.
  • Employment by industry: Employment rose by 64,200 in the three months to August. Over the past 12 months, 315,100 people have found jobs. A record 13.0 million Aussies are employed.
  • Biggest job gainers: Over the quarter, Health Care & Social Assistance (up 56,100), Professional, Scientific & Technical Services (up 22,400) and Education & Training (up 21,400) recorded the biggest job gains.
  • Biggest employer: Healthcare and Social Assistance remains Australia’s leading employer, employing 1.73 million people or 13.4 per cent of all jobs.

The wealth data is important as a guide to future spending. Job vacancies is a leading indicator for the job market, and therefore provides guidance on spending. The data on employment by industry gives insights into which industries are growing the fastest as well as insights on the performance of the broader economy.

What does it all mean?

  •  The Finance & Wealth publication from the Bureau of Statistics contains the most complete figures on household finances. In a positive development, total household wealth (net worth) hit record highs in the June quarter. And per capita wealth rose in the June quarter and is just below the record high of $416,389 per person posted a year ago.
  • The Aussie sharemarket acted as a wealth ‘buffer’ against the modest 0.7 per cent fall in Aussie residential home prices (source: ABS) during the June quarter. In the quarter, the S&P/ASX200 index rose by 7.1 per cent.
  • Foreigners increased their allocation to Aussie listed shares during the June quarter. Foreign ownership of Aussie shares hit 6½-year highs at 31.5 per cent, up from 31.3 per cent in the March quarter.
  • The weaker value of the Aussie dollar against the greenback, a desire for iron ore exposure, attractive dividend yields, solid payout ratios and likely further interest rate cuts have boosted foreign demand for Aussie shares. And the local sharemarket’s relatively defensive composition when compared to its China supply-chain exposed peers in Asia have made Aussie shares an attractive proposition as the global ‘chase for yield’ intensified.
  • Looking ahead, Aussie per capita wealth is expected to be supported by a revival in the property market – capital city home prices are up around 2 per cent in the September quarter so far, according to CoreLogic’s daily home value index. And the ASX200 index is up around 1 per cent with only a few trading sessions left in the September quarter.

What do the figures show?

Financial Accounts:

  • Total household wealth (net worth) rose by 1.6 per cent to a record high $10,455.3 billion in the June quarter after rising by 0.2 per cent to $10,289.6 billion in the March quarter. Over the year to June, net worth rose by 0.5 per cent.
  • In per capita terms, wealth rose by $4,965.8 in the June quarter to $411,491.7 following a $1,512 decline in the March quarter, arresting three consecutive quarters of declines.
  • The Bureau of Statistics noted: “The increase in household wealth was driven by real (inflation adjusted) holding gains on financial assets, partly offset by holding losses on residential real estate.”
  • The percentage point contributions to the change in household wealth in the June quarter, include:
    • Land and dwellings detracted 0.1 percentage points;
    • Financial assets contributed 2.0 percentage points;
    • Financial liabilities detracted 0.4 percentage points.
  • Households held a record $1,163.8 billion in cash and deposits at the end of June. Cash and deposit holdings represented 20.8 per cent of financial assets, down from 21.6 per cent in the March quarter and below the 21.8 per cent average since the global financial crisis and long-run average of 21.7 per cent.
  • Households held $1,040.5 billion in shares or 18.6 per cent of all financial assets in the June quarter, down from 18.9 per cent in the March quarter, but below the 19.3 per cent average since the global financial crisis and the long-run average of 22.5 per cent.
  • Pension fund (superannuation fund) assets rose by $106.4 billion to a record-high $2,424.7 billion in the June quarter. Cash and deposits stood at 10.3 per cent of financial assets, below the 12.9 per cent average since the global financial crisis, but above the long-term average of 9.4 per cent.
  • Foreigners held a record high $645.3 billion of Aussie listed shares in the June quarter, up from $604.8 billion in the March quarter. Foreigners held 31.5 per cent of total listed shares – a 6½-year high – but slightly below the 31.6 per cent average since the global financial crisis and long-term average of 32.8 per cent.

Job vacancies

  •  Job vacancies fell 1.9 per cent in the three months to August. Vacancies are also down by 1.9 per cent on a year ago – the biggest annual decline in 5½ years.
  • In original terms, annual changes in vacancies across states and territories were: NSW (down 7.5 per cent); Victoria (down 9.2 per cent); Queensland (up 13.4 per cent); South Australia (down 3.4 per cent); Western Australia (up 3.3 per cent); Tasmania (up 23.3 per cent); Northern Territory (up 18.9 per cent) and ACT (up 16.2 per cent).
  • Vacancies fell by 5,100 or 2.1 per cent in original terms in the year to August. In terms of industries, 9 of the 18 industries had increased vacancies. Vacancies rose the most in Public Administration & Safety (up 3,000), Manufacturing (up 1,300) and Mining (up 700). But vacancies fell the most in Professional, Scientific & Technical Services (down 3,900) and Other Services (down 2,800).
  • By sector, private sector job vacancies fell by 2.7 per cent over the three months to August to 211,500 and fell by 3.5 per cent over the year. Vacancies in the public sector rose by 5.9 per cent in the three months to August to 23,500 and rose by 14.1 per cent from a year ago.

Industry Employment

  • Employment rose by 64,200 in the three months to August. Jobs rose in 12 of the 19 industry sectors over the past three months.
  • Over the past 12 months, 315,100 people have found jobs, down from 350,700 in the 12 months to May. A record 13.0 million Aussies are employed.
  • Over the three months to August the number of jobs rose by the most in Health Care & Social Assistance (up 56,100), Professional, Scientific & Technical Services (up 22,400) and Education & Training (up 21,400).
  • In the three months to August, the number of jobs fell by the most in Manufacturing (down 36,900), Public Administration & Safety (down 18,200) and Retail Trade (down 13,800).
  • Over the year to August, 10 out of 19 sectors added jobs. The strongest gains were in Professional, Scientific & Technical Services (up 93,900); Education & Training (up 81,900) and Administration & Support Services (up 74,800).
  • The sectors that shed the most jobs over the past year including Manufacturing (down 100,800), Public Administration & Safety (down 17,500) and Mining (down 11,500).
  • Health Care and Social Assistance remains the biggest employer with 1.73 million employees (13.4 per cent of the total) followed by Retail Trade (1.28 million jobs or 9.9 per cent), Construction (1.18 million or 9.1 per cent) and Professional, Scientific & Technical Services (1.16 million or 9.0 per cent).

What is the importance of the economic data?

  •  The Australian Bureau of Statistics releases the Financial Accounts publication each quarter. The data covers assets, liabilities and financial flows for the key sectors of the economy. Figures on financial wealth help reveal the true state of household finances.
  • The Australian Bureau of Statistics releases Job Vacancies data each quarter. The data is useful in gauging the strength of the job market.
  • 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.

What are the implications for interest rates and investors?

  • As evidenced by today’s wealth report, the Reserve Bank will be hoping that Aussie shares and bonds will continue to do the ‘heavy lifting’, shielding households from the downside risks associated with slow wages growth and the potential loss of momentum in the jobs market. That said, property prices are lifting again in Sydney and Melbourne, boosting the ‘wealth effect’
  • The loss of momentum on job vacancies – particularly in the most populous states of New South Wales and Victoria – points to slower employment ahead and thus giving the Reserve Bank further reason to be cutting interest rates.
  • Commonwealth Bank Group economists expect a rate cut on October 1 and a follow up rate cut on February 4 2020.

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