How are Australia’s states and territories performing?

• Each quarter CommSec attempts to find out which state or territory is Australia’s economic leader. Now in its 16^th year, the report also includes a section comparing annual growth rates for the eight key indicators across the states and territories as well as Australia as a whole, enabling comparisons in terms of economic momentum.
• Overall, the economic performances of Australian states and territories are being supported by a strong job market, robust government spending and solid population growth at a time of higher-than-desired cost-of-living pressures. But economic growth has slowed, with consumers squeezed by elevated mortgage costs. The future path will depend on the resiliency of the job market, expected interest rate cuts, the federal election outcome and China’s demand for commodities in the face of rising US import tariffs.
• Western Australia leads the national performance rankings for the third successive report. The state is ranked first on five of the eight economic indicators.
• In a closely fought contest, Victoria jumps up to second place from fourth spot. Queensland slips from second to third spot, just ahead of South Australia now in fourth, also dropping from equal second spot.
• Tasmania is steady in fifth place but is joined by NSW, which lifts from sixth spot. The ACT remains seventh.
• The Northern Territory stays in eighth spot. We acknowledge that the economic performance ranking criteria disadvantages this small, open economy. As a result, we highlight the annual growth rankings—a measure of economic momentum.
• Measuring annual growth rates of the eight economic indicators Western Australia replaces Queensland in first spot, which slips back to second. Victoria remains third and South Australia stays fourth. The Northern Territory remains fifth ahead of NSW in sixth and Tasmania in seventh. The ACT slips to eighth spot.

Analysis

Where to from here?

• Last quarter (January 2025, Edition 62) we noted that Western Australia and Queensland were expected to continue their recent domination of the rankings in early 2025. While Western Australia tightened its grip atop the national economic leaderboard, both Queensland and South Australia slipped back from joint second to third and fourth places, respectively, losing some momentum. The pace of gains in the states home prices are slowing following a strong post-pandemic upswing.
• Victoria is the biggest surprise, jumping from fourth to second spot. The southern state continues to benefit from solid retail spending and inbound overseas migration.
• Looking ahead, an expected reduction in interest rates could boost economic sentiment in the mortgage-sensitive states of NSW and Victoria. Federal election uncertainties and a potential public service downsize pose a downside risk to the ACT economy. The escalating US-China trade war could dampen growth in Western Australia, Queensland and the Northern Territory due to their reliance on Chinese demand for commodity exports.

Methodology

• Each of the state and territory economies were assessed on eight key indicators: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements.
• The aim is to find how each economy is performing compared with ‘normal’. Similar to what the Reserve Bank of Australia (RBA) does with interest rates, we used decade averages to judge the ‘normal’ state of affairs. For each economy, the latest level of the indicator—such as retail spending or economic growth—was compared with the decade average.
• While we also looked at the current pace of growth to assess economic momentum, it may yield perverse results to judge performance. For instance, retail spending may be up sharply on a year ago but from depressed levels. Overall spending may still be well below ‘normal’.
• And clearly some states, such as Queensland and Western Australia, traditionally have had faster economic growth rates due to historically faster population growth. So the best way to assess economic performance is to look at each indicator in relation to what would be considered ‘normal’ for that state or territory.
• For instance, the trend jobless rates in South Australia and Tasmania both stood at 3.9 per cent in March 2025. But the Tasmanian unemployment rate was 28.8 per cent below its decade average of 5.5 per cent, while the South Australian jobless rate of 3.9 per cent was 31.0 per cent below its decade average of 5.7 per cent. So South Australia ranks above Tasmania on this indicator.
• Seasonally adjusted or trend measures of the economic indicators were used to assess performance on all measures. The preference was for the less volatile trend measures. Original data is used to assess population growth.
• We now measure economic growth using real state demand plus real net trade in goods and services in seasonally adjusted terms. While the data only extends back four years, the results can be consistently compared for all economies in real terms.

Read the report.

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How are Australia’s states and territories performing?

• Each quarter CommSec attempts to find out which state or territory is Australia’s economic leader. Now in its 16^th year, the report also includes a section comparing annual growth rates for the eight key indicators across the states and territories as well as Australia as a whole, enabling comparisons in terms of economic momentum.
• Overall, the economic performances of Australian states and territories are being supported by a solid job market and strong population growth at a time of higher-than-desired price inflation.
• Australia’s state and territory economies have slowed as consumers respond to higher borrowing costs and price pressures. The future path will depend on the resiliency of the job market and interest rates.
• Western Australia now leads the national performance rankings for the first time in a decade. The state is ranked first on three of the eight indicators. In a closely fought contest, South Australia slips to second spot.
• The big mover is Queensland, which jumps up to third from fifth place. Victoria slips off the podium to fourth from third place, with Tasmania inching up to fifth from sixth spot.
• The ACT has tumbled to sixth place from fourth, followed by NSW, which is still in seventh place.
• The Northern Territory remains in eighth spot. We acknowledge that the economic performance ranking criteria disadvantages this small, open economy. As a result, we highlight the annual growth rankings—a measure of economic momentum.
• Measuring annual growth rates of the eight economic indicators, Western Australia is now alone in first spot. Queensland is second, the Northern Territory is third and the ACT is fourth. Tasmania stays fifth ahead of South Australia in sixth spot, followed by Victoria and NSW in seventh and eighth spots, respectively.

Analysis

Where to from here?

• Last quarter we noted that Western Australia was in prime position to take over from South Australia in first place. We also said Victoria, Queensland and the ACT were all in striking distance of top spot too with solid annual growth rates.
• While Western Australia and Queensland moved up the leaderboard, as expected, Victoria and the ACT lost some momentum and are now ranked mid-table in a tight cluster with Tasmania.
• Looking ahead, Western Australia could consolidate its position atop the leaderboard given its strong recent economic performance.
• South Australia’s economy has lost some momentum recently, but alongside the fast-improving Queensland economy, remains in striking distance of top spot.

Methodology

• Each of the state and territory economies were assessed on eight key indicators: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements.
• The aim is to find how each economy is performing compared with ‘normal’. Similar to what the Reserve Bank does with interest rates, we used decade averages to judge the ‘normal’ state of affairs. For each economy, the latest level of the indicator—such as retail spending or economic growth—was compared with the decade average.
• While we also looked at the current pace of growth to assess economic momentum, it may yield perverse results to judge performance. For instance, retail spending may be up sharply on a year ago but from depressed levels. Overall spending may still be well below ‘normal’.
• And clearly some states, such as Queensland and Western Australia, traditionally have had faster economic growth rates due to historically faster population growth. So the best way to assess economic performance is to look at each indicator in relation to what would be considered ‘normal’ for that state or territory.
• For instance, the trend jobless rate in NSW stood at 3.9 per cent in September 2024. But the NSW unemployment rate was 17.9 per cent below its decade average, while the South Australian jobless rate of 4.2 per cent was 27.6 per cent below its decade average. So South Australia ranks above NSW on this indicator.
• Seasonally adjusted or trend measures of the economic indicators were used to assess performance on all measures. The preference was for the less volatile trend measures. Original data is used to assess population growth.
• We now measure economic growth using real state demand plus real net trade in goods and services in seasonally adjusted terms. While the data only extends back four years, the results can be consistently compared for all economies in real terms.

Read the report.

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Ryan Felsman

Labour force – October 2023

• The unemployment rate ticked up to 3.7% in October, reversing the dip down in September.
• Employment rose by 55k in October, driven by a 37.9k increase in part‑time employment.
• Growth in hours worked slowed further to 1.7%/yr, and trend‑adjusted hours worked has declined over H2 23.

The labour market remains tight but there are pockets of cooling

The October labour force survey showed a tick up in the unemployment rate to 3.7%.  That was in line with our estimate and also the market consensus.  It follows the temporary dip to 3.6% in September and is unchanged from the unemployment rate figure in July and August.

The seasonally adjusted unemployment rate has bounced around over recent months.  The trend unemployment rate, as shown in the facing chart, showed that there has been a clear pick‑up in the upward trajectory since its trough in October last year.  However, the unemployment rate remains much lower than implied by its historical relationships with other labour market indicators such as surveyed measures of unemployment expectations and job ads.

The underemployment rate was unchanged at 6.3%.  It stands well above the trough of 5.8% seen in February, but has been little changed over the second half of this year.

The October figures also showed a bounce in employment, with a 37.9k increase in part‑time employment and a smaller 17.0k increase in full‑time employment.  The 55k lift in employment follows the modest 7.8k (revised from 6.7k) increase in September and 70.3k (revised from 63.3k) in August.

There has been a clear shift in recent months in the main driver of employment growth, as the facing chart shows.  Employment growth over 2022 had been characterised by big lifts in full‑time employment.  More recently, that has shifted to part‑time jobs growth.  Over the past four months, part‑time employment has increased by 3.9%.  Over the same period, full‑time employment has decreased by 0.3%.

Hours worked rose by 0.5% in the month and just 1.7% over the year to October.  Trend‑adjusted hours worked has been declining since July.  The 1.7%/yr lift in hours worked compares with the 3.0%/yr increase in employment.  The stronger pace of jobs growth lines up with the relative strength in part‑time jobs and also the faster pick‑up in underemployment.  This switch though could be seen as a sign of cooling in the labour market.

The participation rate rose back to a record high 67.0%.  That reverses the tick down we saw in September.  The working age population continued to increase further, up by 55.2k in the month.  The working age population is now up by 2.9% over the year to October.

As had been flagged in an earlier ABS release, this month’s labour force report was influenced by the Aboriginal and Torres Strait Islander Voice referendum.  The referendum was held on 14 October, and the survey’s reference period was from 1‑14 October.  The ABS noted that the referendum had a temporary effect on employment, hours and participation in October.  Given that, we could expect some payback next month, perhaps more so in employment, given that was stronger than expected.  However, the ABS stated that the temporary impact of the referendum cannot be quantified.

The cohort details in the survey added to the weight of evidence that the labour market is cooling.  In particular, the youth unemployment rate rose further in October, to 9.2%, the highest since late 2021 (see facing chart).  These figures can be volatile month‑to‑month, but the trend youth unemployment rate has increased by 1 percentage point, up from 7.7% a year ago to 8.7%.

By state, WA saw the largest tick up in unemployment (+0.5ppts to 3.8%).  Qld (+0.4ppts to 4.3%) and Vic (+0.3ppts to 3.8%) also saw increases.  There were more modest changes in NSW (+0.1ppts to 3.4%) and SA (‑0.1ppts to 3.6%).

Last week’s labour force survey follows on from yesterday’s Wage Price Index data, covered by my colleague Belinda Allen. We would view both the wages and jobs numbers as broadly in line with the RBA’s forecasts.  As such, the RBA will be focusing on the inflation data ahead of the December Board meeting.  The October CPI indicator (due out 29/11) will be the one to watch.

What does it mean for investors?

Aussie employment jumped in October, after modest gains in September, though the unemployment rate still ticked higher as more people went looking for work and strong inbound migration boosted the supply of workers. The economy added 55,000 jobs in October, more than double economists’ forecasts of 24,000.

But the hiring frenzy was driven primarily by part-time jobs – which surged by 37,900 positions – in October. The tilt towards part-time job hiring – with 161,500 positions added in the past four months – suggests that employers are becoming more cautious about hiring permanent workers amid a jump in borrowing costs and slowing consumer demand. That said, the lift in part-time staff may also reflect hiring for the Australian Indigenous Voice referendum that was conducted on October 14.

The number of full-time positions rose by 17,100 last month, but a net 29,800 full-time jobs have been shed since June.

Australia’s unemployment rate rose from 3.55% in September to 3.72% in October, the highest level since July. The jobless rate has hovered between the range of 3.4% – 3.7% since June last year, near 50-year lows.

Higher unemployment was driven by more people looking for work, with the participation rate increasing from 66.8% in September to a record high 67% in October.

Record inflows of overseas migrants and international students have boosted the supply of labour to meet demand, with population growth up by 55,200 people. So while employment growth was solid at 55,000 in October, Australia’s labour force expanded by an even larger 83,000 people.

Monthly hours worked in all jobs rose by 0.5% to 1,939.4 million hours. Hours worked are up 1.7% on a year ago, but down from 5% in the middle of this year. Last month, hours worked lifted 2.1% in Queensland but fell 3.8% in Tasmania. “The recent slowdown in the growth of hours worked may suggest that the labour market is starting to slow, following a particularly strong period of growth,” said Bjorn Jarvis, the Bureau of Statistics head of labour statistics.

The labour market remains tight, though measures of spare capacity continue to edge higher from October 2022 cycle lows. Australia’s underemployment rate remained at 6.3% in October. The underutilisation rate, which combines the unemployment and underemployment rates, rose 0.1 percentage points to 10%.

The jobless rate in NSW is the lowest across Australia at 3.4% in October, with 20,100 jobs added in the month. Victoria gained 34,400 jobs last month but the jobless rate crept up to 3.8%. Queensland added 10,600 positions with the jobless rate at 4.3%. And Western Australia gained 9,500 jobs with the unemployment rate higher at 3.8%. Increases were more modest elsewhere.

Forward-looking indicators of jobs growth have begun to moderate. In fact, Jobs & Skills Australia yesterday reported that national online job advertisements fell by 3.8% or 10,380 job advertisements to stand at 261,174 in October. Ads are down by 9.1% or 26,235 available positions on a year ago. SEEK job ads were reported down 5% last month, and 19.9% lower on a year ago, while applications per job ad are up 4.1%.

There was little market reaction to the data showing that Australian employment had beat economists’ forecasts with a rise of 55,000 in October, though that was balanced by a lift in the unemployment rate to 3.7%.

The higher jobless rate may also soothe the Reserve Bank’s (RBA) concerns over solid wage inflation. RBA Governor Michele Bullock recently described the labour market as “not as tight as it was”, noting that some leading indicators such as job vacancies have begun to ease from high levels.

And with record migration helping meet the demand for labour, traders doubt the RBA will hike interest rates again in the near term, following last week’s quarter point lift to 4.35%. Futures imply only a 7% chance of another rise in December. That said, money markets still see a 60% chance of another hike to 4.60% in the first half of next year, with low unemployment likely to keep wages growth elevated. The next key data point will be the monthly consumer price index (CPI) indicator released on November 29.

The Aussie dollar (AUD) edged higher from US65.04 cents to US65.16 cents immediately following the release of the job report, but the AUD has since slipped to around US64.60 cents.

The interest-rate sensitive Australian 3-year government bond yield rose from 4.197% to 4.206% following the labour force survey, but has since eased to near 4.178%.

The S&P/ASX 200 index traded slightly lower at the open, before losing momentum over Thursday’s trading session, as investors evaluated Wednesday’s strong wages data against today’s mixed jobs report.

The initial response to the Aussie jobs report was muted, but news that Chinese home prices fell by the most in eight years in October, weighed on risk sentiment. At the time of writing, the ASX 200 index was down around 40 points or 0.6% to near 7,065 points, with rate-sensitive technology and real estate shares down 0.9% each.

By Ryan Felsman

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• The Internet Vacancy Index (IVI) from the National Skills Commission fell by 3.8 per cent in July (or by 11,249 available positions) to 288,465 available positions. Recruitment activity decreased for the first time in seven months with the number of vacancies down from a 14-year high of 299,714 positions in June.
• Skilled job vacancies, however, were up by 24.5 per cent (or 56,725 ads) in July on a year ago and were 71.4 per cent (or around 120,200 available positions) higher than pre-Covid levels.
• In three-month moving average terms, regional job vacancies hit an all-time high 86,865 available positions in July (highest since May 2010), up by 4.2 per cent from June. Vacancies are up 24.7 per cent on a year ago and 104.5 per cent above pre-Covid levels. Ads are at record highs in 15 regions.

What does it all mean?

• Australia’s “Great Job Boom” may have peaked. A month ago, SEEK reported that online job ad volumes fell by 2.1 per cent in June. Then earlier this month, ANZ reported that its measure of the number of job ads slid by 1.1 per cent in July. And today, the National Skills Commission issued its detailed Internet Vacancy Index (IVI), which declined by 3.8 per cent in July, also posting its first fall in the number of job vacancies in 2022.
• While labour demand appears to be easing, as rising interest rates and soaring inflation begin to slow hiring activity, the number of unfilled job vacancies around the country remains extraordinarily elevated. In fact, the IVI is still a massive 71.4 per cent (or around 120,200 ads) higher than pre-Covid levels in February 2020. And with 288,465 ads still being advertised on SEEK, CareerOne and JobSearch, available online positions in July were a smidgen below 14-year highs.
• Nationally, job ads fell in 41 of the 48 occupational groups last month. Hospitality Workers recorded the largest fall (down by 3,400 job advertisements or 31.6 per cent), followed by Food Trades Workers (down by 1,600 job advertisements or 18.4 per cent) and Food Preparation Assistants (down by 1,100 job advertisements or 36.4 per cent). But Mobile Plant Operators recorded the largest increase (up by 180 job advertisements or 4.6 per cent).
• Recruitment activity decreased across all states and territories in July. Vacancies declined by the most in the Northern Territory (down by 8.2 per cent or 257 job ads), followed by Victoria (down by 7.8 per cent or 6,239 job ads) and the ACT (down by 6.0 per cent or 488 job ads).
• Australia’s regions experienced a renaissance in the pandemic with record-breaking recruitment activity. In three-month moving average terms, regional job vacancies hit an all-time high 86,865 available positions in July (highest since May 2010), up by 4.2 per cent from June. Vacancies are up 24.7 per cent on a year ago and 104.5 per cent above pre-Covid levels. Ads are at record highs in 15 Aussie regions.
• Across major capital cities, the number of skilled job vacancies hit record highs (highest since May 2010) in Brisbane (33,906), Adelaide (13,232) and Perth (26,009) in three-month moving average terms in July. Vacancies in Hobart reached an all-time high of 2,196 available positions, but is classified as a “regional area” due to the broader inclusion of Southeast Tasmania by the National Skills Commission.
• Australia’s labour market has been incredibly strong during the pandemic. In July, the unemployment rate fell to a 48-year low of just 3.4 per cent and the underutilisation rate hit a 40-year low of 9.4 per cent. But wages grew by just 2.6 per cent over the year to June, the strongest annual growth rate in eight years. And with consumer prices soaring by 6.1 per cent over the same period, real wages fell by 3.5 per cent, the worst outcome for Aussie workers since the Bureau of Statistics began measuring wages in 1997. And recent forecasts by the Reserve Bank suggest that real wages will remain negative – that is, wages growing more slowly than consumer prices – for the next two years (to June 2024).
• One of the tasks of policymakers at the upcoming Jobs and Skills Summit in September will be to investigate the imbalance that has arisen between company profits and labour compensation. Productivity-driven real wages growth will only occur if a more equitable method of wage setting is implemented.
• And while an increase in skilled migration could improve labour mobility and job matching, the re-opening of borders is likely to eventually boost labour supply at a time when the economy is slowing, pushing up the unemployment rate. In our view, these changing labour market dynamics is likely to see the Reserve Bank pivot to a more gradual pace of interest rate hikes in the coming months with the official cash rate peaking at 2.6 per cent by year-end.

What do you need to know?

Skilled job vacancies – July

• The Internet Vacancy Index (IVI) from the National Skills Commission fell by 3.8 per cent in July (or by 11,249 available positions) to 288,465 available positions. Recruitment activity decreased for the first time in seven months with the number of vacancies down from a 14-year high of 299,714 positions in June.
• But skilled job vacancies were up by 24.5 per cent (or 56,725 ads) in July on a year ago and were 71.4 per cent (or around 120,200 available positions) higher than pre-Covid levels.
• Skilled job vacancies fell across all states and territories in July, led by declines in the Northern Territory, where recruitment activity fell by 8.2 per cent (or 257 job ads), followed by Victoria (down by 7.8 per cent or 6,239 job ads), the ACT (down by 6.0 per cent or 488 job ads), Queensland (down by 4.0 per cent or 2,436 job ads), Western Australia (down by 3.6 per cent or 1,242 job ads), Tasmania (down by 3.5 per cent or 152 job ads), NSW (down by 2.6 per cent or 2,430 job ads), and South Australia (down by 0.8 per cent or 125 job ads).
• Job vacancies decreased in 41 of the 48 major occupational groups in July. Hospitality Workers recorded the largest fall (down by 3,400 job advertisements or 31.6 per cent), followed by Food Trades Workers (down by 1,600 job advertisements or 18.4 per cent) and Food Preparation Assistants (down by 1,100 job advertisements or 36.4 per cent). But Mobile Plant Operators recorded the largest increase (up by 180 job advertisements or 4.6 per cent).

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• The weekly ANZ-Roy Morgan consumer confidence index fell by 4.5 per cent last week to 80.3 points, the lowest level since April 2020. The long-run index average since 1990 is 112.2 points.
• The monthly Westpac-Melbourne Institute consumer sentiment index fell 3.0 per cent in August – a ninth consecutive monthly decline – to a two-year low of 81.2 points. Sentiment is down 22.0 per cent on a year ago. Confidence in regional or rural areas fell by 5.0 per cent in August to a record low of 72.8 points (lowest since January 1996).
• The household spending indicator from the Australian Bureau of Statistics (ABS) rose by 10.2 per cent over the year to June. Household spending increased by the most for transport (up 22.7 per cent), followed by hotels, cafes and restaurants (up 17.1 per cent). Spending in Queensland is 12.4 per cent higher over the year to June.

What does it all mean?

• Inflation and interest rate concerns continue to dominate consumer confidence surveys. The Reserve Bank (RBA) Board lifted the cash rate by 50 basis points (half of a percent) for an unprecedented third straight month last week, taking the official interest rate to 1.85 per cent – the highest level since April 2016. This also represents the most aggressive monetary policy action since 1994. The RBA is trying to rein-in soaring inflation, with annual growth in headline consumer prices accelerating to a 21-year high of 6.1 per cent in the June quarter.
• In the first of two consumer confidence surveys released today, sentiment, as measured by ANZ and Roy Morgan, fell by 4.5 per cent last week to a 27-month low of 80.3 points. The lift in borrowing costs dampened confidence among homeowners, down by 7.0 per cent last week, according to ANZ economists. The deepening downturn in the property market – with Sydney experiencing the sharpest fall in home values in around 40 years – also likely weighed on sentiment.
• All five confidence sub-indices fell last week. In fact, consumer views on ‘current economic conditions’ dropped by a massive 10.2 per cent to 60.7 points, the lowest level since September 2020. Sentiment fell by the most in NSW, South Australia and Western Australia, according to ANZ economists
• While historic-low unemployment and a large pool of excess savings continue to support household consumption, the souring of consumer confidence threatens to slow retail spending growth in the back end of 2022. Retail turnover eased in both NSW and Victoria in June as home price declines accelerated in both Sydney and Melbourne. The ANZ and Roy Morgan measure of whether it’s a good ‘time to buy a household item’ dropped by 4.0 per cent last week to 74.6 points – the second lowest level since April 2020.
• And in the second survey conducted by Westpac and the Melbourne Institute, consumer confidence fell by 3.0 per cent in August to a two-year low (lowest since August 2020) of 81.2 points.
• Worryingly, rural or regional Australia consumer confidence fell by 5.0 per cent in August to a record low of 72.8 points (the lowest level since January 1996). Sentiment has dropped by 27.2 per cent since March due to flooding on Australia’s East Coast and increased worries about the threat of imported foot-and-mouth disease to Australia’s beef industry. Bloomberg estimates that a potential outbreak of the disease could ravage Australia’s $32 billion livestock industry, with a potential estimated direct economic impact of around $80 billion.
• Despite this, Australia’s regional economy is in good shape with record low unemployment and near record high job vacancies, supporting consumer spending. Home prices lifted in several regions in July – including the Riverina, Murray, Darling Downs and New England – despite rising borrowing costs. And favourable seasonal conditions are continuing to underpin strong production and harvesting across Australia’s agricultural sectors. Trade conditions are challenging, but overseas demand for Aussie grains, beef, wine and citrus produce remains strong, supporting farm incomes.
• The monthly survey was conducted in the week August 1-4, 2022, capturing the RBA’s latest ‘jumbo’ rate hike. In response, Westpac economists said, “there are still a majority of respondents expecting rates to rise by at least 1.0 per cent [from the current official cash rate of 1.85 per cent.]” But, “the proportion of of respondents expecting rates to rise by 1.0 per cent or more over the next 12 months did fall from 72.8 per cent in July to 57.6 per cent [in August].”
• Unsurprisingly, confidence for surveyed respondents holding a mortgage dipped by 8.9 per cent in August, as the lift in borrowing costs and mortgage repayments began to bite. Sentiment amongst those who do not have a mortgage fell by a more modest 2.1 per cent in the month. And rising term deposit and savings rates may have boosted sentiment for Aussies aged 45 years and over that are debt-free with confidence up 0.8 per cent in August.
• The underlying sub-indices were mixed in August. The biggest falls were for consumer views on ‘economic conditions over the next 12 months’ (down 8.0 per cent) and whether it is a good ‘time to buy a major household item’ (down 8.4 per cent). And consumer views on ‘house price expectations’ fell by 7.5 per cent.
• That said, Aussie consumers remain confident about the labour market with the Westpac-Melbourne Institute ‘unemployment expectations’ index at very low levels, falling (improving) by 5.8 per cent in August to 103.4 points, well below the long-run average of 129.5 points. The national unemployment rate hit 48-year lows of 3.5 per cent in July.
• A measure of household spending compiled by the Bureau of Statistics (ABS) shows that household spending rose by 10.2 per cent over the year to June. Spending increased by the most on transport (up 22.7 per cent), followed by hotels, cafes and restaurants (up 17.1 per cent), and clothing and footwear (up 16.3 per cent). By state, spending rose most in Queensland (up 12.4 per cent), followed by Victoria (up 11.8 per cent) and Tasmania (up 10.8 per cent) through the year.

What do you need to know?

Weekly consumer sentiment – August 7

• The weekly ANZ-Roy Morgan consumer confidence index fell by 4.5 per cent to 80.3 points, the lowest level since April 2020. The long-run average since 1990 is 112.2 points. All five major sub-components fell last week:

Monthly consumer confidence – August

• The Westpac-Melbourne Institute consumer sentiment index fell by 3.0 per cent in August – a ninth consecutive monthly decline – to a two-year low of 81.2 points. Sentiment is down 22.0 per cent on a year ago.
• Three of the five major components of the index fell in August.

• Of the other key sub-components in August:
  • The ‘time to buy a dwelling’ index fell by 2.3 per cent to 78.2 points.
  • The ‘house price expectations’ index dipped by 7.5 per cent to 97.1 points.
  • The ‘unemployment expectations’ index fell (improved) by 5.8 per cent to 103.4 points.
• The survey was taken over the period August 1-4, 2022.

ABS household spending indicator – June

•  The Australian Bureau of Statistics (ABS) has released the June data of its household spending indicator. The measure utilises data from banks on credit and debit card activity.
  • Household spending increased by 10.2 per cent through the year to June, current price, calendar-adjusted.
  • Through the year, household spending increased for both services (up 15.9 per cent) and goods (up 5.0 per cent).
  • Through the year, both discretionary (up 10.8 per cent) and non-discretionary (up 9.8 per cent) spending increased.
  • By category, spending increased by the most for transport (up 22.7 per cent), followed by hotels, cafes and restaurants (up 17.1 per cent), and clothing and footwear (up 16.3 per cent).
  • By state, spending rose most through the year in Queensland (up 12.4 per cent), followed by Victoria (up 11.8 per cent) and Tasmania (up 10.8 per cent).

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• Employment rose by 88,400 in June (consensus: +30,000) with full-time jobs up by 52,900 and part-time jobs lifting by 35,500. Total employment hit a record high of 13.6 million in June.
• The unemployment rate fell from 3.9 per cent in May to 3.5 per cent in June (lowest since August 1974). The number of unemployed fell by 54,300 in June.
• The participation rate rose from 66.7 per cent in May to a record high of 66.8 per cent in June. The employment to population ratio hit fresh record highs of 64.4 per cent in June.
• The underemployment rate rose from a 14-year low of 5.7 per cent to 6.1 per cent in June. And the underutilisation rate was steady at a 40-year low of 9.6 per cent in June (lowest since April 1982).
• Hours worked fell less than 0.1 per cent to 1,856 million in June, but was up 3.8 per cent on a year ago.
• Unemployment across states/territories in June: NSW 3.3 per cent, a record low (May: 4.0 per cent); Victoria 3.2 per cent, a record low (3.7 per cent); Queensland 4.0 per cent, equal 13½-year low (4.0 per cent); South Australia 4.3 per cent (4.6 per cent); Western Australia 3.4 per cent (3.1 per cent); Tasmania 4.3 per cent (4.5 per cent); Northern Territory 3.7 per cent (4.1 per cent); ACT 3.1 per cent (3.3 per cent).
• Employment across states/territories in June: NSW +25,700; Victoria +28,500; Queensland +13,400; South Australia +500; Western Australia -9,100; Tasmania -1,200; Northern Territory -5,500; ACT flat.

What does it all mean?

• Australia’s great jobs boom continued in June with the economy adding another 88,400 positions. Employment lifted for an eighth consecutive month following the easing of Covid-19 lockdown restrictions in late 2021. Australia’s labour market is incredibly tight with almost the same number of unemployed people (494,000) and vacant jobs (481,000), according to data released today by the Australian Bureau of Statistics (ABS).
• Average employment growth in the past three months (to June) of 51,200 positions is much stronger than the pre-pandemic trend growth of around 20,000 positions per month. And recruitment activity has been so buoyant that a massive 438,000 jobs have been added by the Aussie economy over the past year.
• What is even more remarkable is Australia’s unemployment rate, which has hit multi-decade lows. The jobless rate fell from 3.9 per cent in May to a staggeringly low 3.5 per cent in June, the lowest rate since August 1974. An unemployment rate below 4.0 per cent is broadly consistent with “full-employment”, with the Federal Treasury’s estimate of “full-employment” even higher at between 4.5 per cent and 5.0 per cent.
• In June, full-time employment lifted by 52,900 in another sign of labour market strength with employers keen to lock-in permanent staff on higher wages, given acute skills shortages. Nationally, the 3.4 per cent unemployment rate for females was the lowest since February 1974 and the 3.6 per cent jobless rate for men was the lowest since May 1976. The youth unemployment rate fell from 8.8 per cent in May to a near 14-year low of 7.9 per cent in June (lowest since August 2008).
• Such is the strength of the labour market, a record 13.6 million Aussies were employed at the end of June. Record high job vacancies, higher pay packets and rising cost of living pressures are encouraging more workers to look for a job, to increase their hours of work, or to switch jobs.
• Australia’s labour force participation rate hit an all-time high of 66.8 per cent last month. The female participation rate rose from 62.3 per cent in May to 62.5 per cent in June, the highest recorded since February 1978, when the ABS began recording monthly job numbers. And the male participation rate of 71.2 per cent in June was the equal highest rate since August 2019, prior to the pandemic.
• And despite elevated worker absenteeism due to influenza, rising Covid-19 cases and flooding on Australia’s East Coast, hours worked by Aussies fell less than 0.1 per cent in June. Hours worked in Queensland (down 1.5 per cent) and Tasmania (down 1.4 per cent) fell the most, but hours worked in South Australia jumped 1.4 per cent with NSW hours worked 1.0 per cent higher.
• Most jobs were added in Victoria (up 28,500) in June, followed by NSW (up 25,700) and Queensland (up 13,400). The jobless rates in Victoria (3.2 per cent) and NSW (3.3 per cent) were the lowest recorded since February 1978.
• The overall reduction in Australia’s labour market slack is further evidenced by the multi-decade low underutilisation rate. In fact, the underutilisation rate was steady at a 40-year low of 9.6 per cent in June (lowest since April 1982). The underemployment rate, however, rose from a 14-year low of 5.7 per cent to 6.1 per cent in June.
• Forward-looking indicators of labour demand remain incredibly strong, outpacing the supply of workers. As mentioned above, the ABS’ measure of job vacancies hit a record high 480,100 available positions in May. The National Skills Commission’s job vacancy gauge recorded 303,434 available positions in June, the highest level in 14 years (since April 2008). And ANZ reported 243,523 job ads in June, surpassing its recent peak.
• The tight labour market is expected to lead to an increase in wages growth. The NAB’s business survey showed that labour costs grew by a record 3.6 per cent in quarterly terms in June. And the Fair Work Commission’s recent decision to increase the minimum wage by 5.2 per cent and award wages by at least 4.6 per cent portends upside risk to pay packets over the next 6-12 months. Commonwealth Bank (CBA) Group economists expect the annual growth rate of the wage price index (WPI) to lift from 2.4 per cent in the March quarter of 2022 to 3.25 per cent in early 2023.
• The near-term prospects for the job market remain intact, despite rising interest rates, and weaker consumer and business confidence. That said, online job search engine SEEK today reported that its measure of job ads fell by 2.1 per cent in June, with applications per job down 4.6 per cent. It was the first month since April 2020 that all states and territories recorded a drop in job ads. And the reopening of Australia’s international border has fuelled growth in the working-age population, with the expected return of foreign workers helping to increase worker supply.
• Nevertheless, labour market indicators remain resilient, and we expect further tightening of the labour force over the next few months. Due to the size of the upside surprise, our Reserve Bank (RBA) interest rate call is under review.  The RBA Board will be looking at today’s labour force survey as well as the June quarter inflation print (released on July 27) as it prepares to update its set of forecasts for the August Board meeting (August 2) and for release in the Statement on Monetary Policy (August 5).
• On the government policy front, Prime Minister Anthony Albanese and Treasurer Jim Chalmers have announced a jobs and skills summit to be held in early September, which has the potential to drive significant labour market reforms. Australia’s skilled labour crisis is worsening, with businesses struggling to fill jobs amid a mismatch between people’s expertise and the work available across the nation. In our view, increased investment in education and training, enhanced workforce participation and a sustainable skilled migration program is required to address chronic worker shortages.

What do you need to know?

Labour force – June

• Employment rose by 88,400 in June with full-time jobs up by 52,900 and part-time jobs lifting by 35,500. Total employment hit a record high of 13.6 million in June.
• The unemployment rate fell from 3.9 per cent in May to 3.5 per cent in June (lowest since August 1974).
• The participation rate rose from 66.7 per cent in May to a record high of 66.8 per cent in June. The employment to population ratio hit fresh record highs of 64.4 per cent in June.
• The underemployment rate rose from a 14-year low of 5.7 per cent to 6.1 per cent in June. And the underutilisation rate was steady at a 40-year low of 9.6 per cent in June (lowest since April 1982).
• Hours worked fell less than 0.1 per cent to 1,856 million in June, but was up 3.8 per cent on a year ago.
• The 3.4 per cent unemployment rate for females was the lowest since February 1974 and the 3.6 per cent jobless rate for men was the lowest since May 1976.
• The youth unemployment rate fell from 8.8 per cent in May to a near 14-year low of 7.9 per cent in June (lowest since August 2008).
• Unemployment across states/territories in June: NSW 3.3 per cent, a record low (May: 4.0 per cent); Victoria 3.2 per cent, a record low (3.7 per cent); Queensland 4.0 per cent, equal 13½-year low (4.0 per cent); South Australia 4.3 per cent (4.6 per cent); Western Australia 3.4 per cent (3.1 per cent); Tasmania 4.3 per cent (4.5 per cent); Northern Territory 3.7 per cent (4.1 per cent); ACT 3.1 per cent (3.3 per cent).
• Employment across states/territories in June: NSW +25,700; Victoria +28,500; Queensland +13,400; South Australia +500; Western Australia -9,100; Tasmania -1,200; Northern Territory -5,500; ACT flat.

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• The weekly ANZ-Roy Morgan consumer confidence index fell by 2.5 per cent to 81.6 (long-run average since 1990 is 112.4). Consumer inflation expectations over the next two years hit a 15-week high of 6.0 per cent.
• The Westpac-Melbourne Institute consumer sentiment index fell by 3.0 per cent in July – a seventh successive monthly decline in 2022 – to a 23-month low of 83.8 points, down 23.0 per cent on a year ago.
• Commonwealth Bank (CBA) economists reported the CBA Household Spending Intentions (HSI) index rose by 0.9 per cent in June to an equal record high of 117.3 points. The largest gains were in transport, education and household services.

What does it all mean?

• Inflation and interest rate concerns continue to dominate consumer confidence surveys. The Reserve Bank of Australia (RBA) hiked the official cash rate by another 50 basis points (bp) to 1.35 per cent at its July 5, 2022 Board meeting. And unleaded retail petrol prices hit record highs in Adelaide, Darwin and Melbourne at the beginning of July. Persistent worries about falling home prices and sharemarkets also likely weighed on sentiment.
• In the first of two consumer confidence surveys released today, sentiment, as measured by ANZ and Roy Morgan, fell by 2.5 per cent last week to 81.6 points. ANZ economists reported, “The RBA’s 50bp rate hike last week weighed on sentiment, with confidence falling for those people paying off a mortgage by a sharp 5.4 per cent.”
• According to the Australian Institute of Petroleum (AIP), the national average unleaded petrol price rose by 1.0 cent to 212.1 cents a litre (c/l) last week – just below the record high of 212.5c/l on March 20, 2022. With pump prices hovering near record highs, consumer inflation expectations over the next two years hit a 15-week high of 6.0 per cent.
• And in a second survey conducted by Westpac and the Melbourne Institute, consumer confidence fell by 3.0 per cent in July to a 23-month low (since August 2020) of 83.8 points.
• The survey was conducted in the week July 4-7, 2022, capturing the RBA’s latest rate hike. In response, Westpac economists said, “Sentiment amongst those polled after [the RBA’s July rate hike] was 7.4 per cent below that of those surveyed before the decision.”
• Westpac economists also asked respondents about their expectations for standard variable mortgage rates as the RBA tightens monetary policy. The economists reported, “Amongst those surveyed just after the RBA decision in June, 64.7 per cent expected the rate to lift by more than 1.0 percentage point over the next twelve months. That proportion increased to 72.8 per cent for those surveyed after the RBA’s July move, despite the materially higher starting point.”
• With pessimists getting the upper hand in the survey, consumer views on their finances and economic conditions broadly deteriorated in July. Consumer views on the ‘economy, the next 12 months’ sub–index fell by 4.2 per cent and the ‘economy, next 5 years’ sub–index dropped 6.7 per cent. And consumer views on their ‘finances versus a year ago’ sub-index fell by 2.8 per cent, but the ‘finances, next 12 months’ sub-index edged up by 0.1 per cent.
• And while consumer spending has been resilient in the face of rising cost of living pressures, consumer views on whether it is a good ‘time to buy a major household item’ dipped by 0.9 per cent to 88.8 points in July, the lowest level since April 2020 and near historic recessionary levels.
• Rising cost of living pressures are starting to weigh on younger Aussies. Sentiment – for surveyed Aussies aged 18-24 years – fell by 7.3 per cent in July to an 11-month low of 108.3 points. And confidence for those aged 25-44 years dipped by 3.0 per cent to a 23-month low of 93.7 points. Sentiment for those aged over 45 years fell 0.8 per cent to a 23-month low of 71.3 points.
• That said, Aussie consumers remain confident about the labour market, with the Westpac-Melbourne Institute ‘unemployment expectations’ index at very low levels, lifting (deteriorating) by just 1.1 per cent in July to 109.8 points, well below the long-run average of 130 points. Economists expect the unemployment rate to fall to a fresh 48-year low of 3.8 per cent in June, when the latest labour force survey is released tomorrow.
• The CBA’s forward-looking Household Spending Intentions (HSI) index, compiled using internally generated transaction and lending data with publicly available Google search terms, rose by 0.9 per cent in June to an equal record high 117.3 points in June.
• Eight out of 12 HSI categories recorded gains last month, led higher by transport, education and household services. But spending intentions fell in the interest rate sensitive retail, home buying categories. But with the RBA hiking interest rates and price pressures building, economists and retailers are likely to pay even closer attention to the HSI’s home buying, motor vehicles, retail and entertainment categories in the coming months.

What do you need to know?

Weekly consumer sentiment – July 10

•  The weekly ANZ-Roy Morgan consumer confidence index fell by 2.5 per cent to 81.6 (long-run average since 1990 is 112.4). All five major sub-components fell last week:

Monthly consumer confidence – July

• The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 3.0 per cent in July – seventh successive monthly decline in 2022 – to a 23-month low of 83.8 points, down 23.0 per cent on a year ago.
• Four of the five major components of the index fell in July.
• Of the other key sub-components in July:
  • The ‘time to buy a dwelling’ index rose by 6.6 per cent to 80.1 points.
  • The ‘house price expectations’ index dipped by 5.6 per cent to 104.9 points.
  • The ‘unemployment expectations’ index rose (deteriorated) by 1.1 per cent to 109.8 points.
• The survey was taken over the period July 4-7, 2022.

The Commonwealth Bank (CBA) Household Spending Intentions (HSI) index – June

• Commonwealth Bank (CBA) economists reported the CommBank Household Spending Intentions (HSI) index rose by 0.9 per cent to an equal record high 117.3 points in June. The index is up 11.9 per cent on a year ago.
• Eight out of 12 HSI categories recorded gains in June, led higher by transport, education and household services. But spending intentions fell in the retail, home buying a categories.

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• The preliminary Internet Vacancy Index (IVI) from the National Skills Commission rose by 8 per cent in April (or 23,135 available positions) to a record high (series since January 2006) of 311,083 available positions. Recruitment activity was up by 33.2 per cent (or 77,525 ads) in April on a year ago and was 84.9 per cent (or around 142,800 available positions) higher than pre-Covid levels.
• The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 5.6 per cent – the biggest fall in 21 months – in May to a 21-month low of 90.4 points, down 20.1 per cent on a year ago.
• Sentiment – for surveyed Aussies aged 18-24 years – rose by 0.9 per cent in May to 110.8 points (above the neutral 100 point level). But confidence for those aged over 45 years dipped 8.2 per cent to a 21-month low of 81.1 points.

What does it all mean?

• Australia’s incredible run of jobs growth likely continued in April. Labour demand remained strong last month as the economy gained momentum, despite multiple challenges for Aussie businesses, including acute cost pressures, persistent supply chain disruptions, rising borrowing costs and political uncertainty.
• In fact, the National Skills Commission’s preliminary Internet Vacancy Index (IVI) jumped by 8 per cent in April – the biggest monthly increase in six months – to a record high (series since January 2006) of 311,083 available positions.
• Recruitment activity was up by an astonishing 33.2 per cent (or 77,525 ads) in April on a year ago and was 84.9 per cent (or around 142,800 available positions) higher than pre-Covid levels.
• Skilled job vacancies rose in all states and territories in April, led by gains in NSW (up 7,027 ads to 14-year highs of 99,012), followed by Queensland (up 5,779 ads to 13½-year highs of 63,050), Victoria (up 5,014 ads to record highs of 81,963), Western Australia (up 2,415 ads to record highs of 35,287), South Australia (up 1,034 ads to 13½-year highs of 15,898), Tasmania (up 255 ads to record highs of 3,725), ACT (up 197 ads to record highs of 8,287) and the Northern Territory (up 179 ads to 10-year highs of 3,330).
• The result bodes well for the April labour force survey when released on Thursday week (May 19, 2022). Commonwealth Bank (CBA) Group economists expect around 30,000 jobs to be added in April, with the national unemployment rate potentially falling to 3.9 per cent, the lowest level since September 1974.
• Consumer sentiment, as measured by Westpac and the Melbourne Institute, fell by 5.6 per cent in May – the biggest fall in 21 months – to a 21-month low (since August 2020) of 90.4 points. Sentiment is down by 20.1 per cent on a year ago, with the index well below its long-run average of 101.4 points.
• The survey was conducted in the week May 1-5, capturing consumer anxiety about rising interest rates after the Reserve Bank hiked the official cash rate by 25 basis to 0.35 per cent on May 3, 2022. The survey found that 77 per cent of respondents expect mortgage interest rates to lift over the next year, with 52 per cent expecting rates to increase by more than 1 per cent.
• In response, the ‘mortgagor’ confidence sub-index fell by 2.9 per cent in May to 91.7 points, the lowest level since August 2020. Confidence for homeowners without a mortgage fell by 3.9 per cent to 93.7 points.
• Sentiment for those aged over 45 years dipped 8.2 per cent to a 21-month low of 81.1 points in May, despite improved prospects for increased interest incomes from bank deposits. But younger Aussies remained most resilient with sentiment for those aged 18-24 years up by 0.9 per cent to 110.8 points. The easing of government virus restrictions and the lowest youth unemployment rate in 13½ years in March may have boosted confidence.
• Given persistent worries about elevated inflation and higher interest rates, it was no surprise to see consumer views on their finances deteriorate in May. According to the survey, the ‘family finances next 12 months’ sub-index dropped by 11.2 per cent to a 21-month low of 93.3 points. And in a sign cost of living pressures are weighing on consumer spending intentions, the ‘time to buy a major household item’ sub-index was down by 5.7 per cent to a 21-month low of 92.6 points.
• Consumers have also become more pessimistic about the economy and the job market, despite the unemployment rate hitting near 48-year lows of 3.95 per cent in March. The measure of ‘unemployment expectations’ index fell (deteriorated) by 10.5 per cent in May to 109.6 points. The sub-index lifted from 99.2 points in April, the second lowest reading since March 1996. And the ‘economy, next 12 months’ sub-index was down 5.8 per cent to a 21-month low of 90.4 points with the ‘economy, next 5 years’ sub-index down by 4.1 per cent to a 21-month low of 96.2 points.
• By occupation, Westpac economists reported that, “Confidence levels are weakest for those employed in hospitality; retail; construction; education; health; the arts; and professional services while those in mining; IT; telecommunications and media; wholesale trade; and government are all registering solid positive reads.”
• Geographically, confidence fell across all major states, led lower by Tasmania (down by 19.1 per cent), followed by Queensland (down 11.7 per cent), NSW (down 4.6 per cent), Western Australia (down 4.2 per cent), Victoria (down 2.8 per cent) and South Australia (down 0.4 per cent). And sentiment in regional or rural Australia dropped by 5.7 per cent.

What do you need to know?

Skilled job vacancies – April

• The preliminary Internet Vacancy Index (IVI) from the National Skills Commission rose by 8 per cent in April (or 23,135 available positions) to a record high (series since January 2006) of 311,083 available positions.
• Recruitment activity was up by 33.2 per cent (or 77,525 ads) in April on a year ago and is 84.9 per cent (or around 142,800 available positions) higher than pre-Covid levels.
• Skilled job vacancies rose in all states and territories in April, led by gains in NSW (up 7,027 ads or 7.6 per cent to 14-year highs of 99,012), followed by Queensland (up 5,779 ads or 10.1 per cent to 13½-year highs of 63,050), Victoria (up 5,014 ads or 6.5 per cent to record highs of 81,963), Western Australia (up 2,415 ads or 7.3 per cent to record highs of 35,287), South Australia (up 1,034 ads or 7 per cent to 13½-year highs of 15,898), Tasmania (up 255 ads or 7.3 per cent to record highs of 3,725), ACT (up 197 ads or 2.4 per cent to record highs of 8,287) and the Northern Territory (up 179 ads or 5.7 per cent to 10-year highs of 3,330).
• The detailed IVI is scheduled for release on Wednesday 25 May 2022.

Consumer confidence – May

• The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 5.6 per cent – the biggest fall in 21 months – in May to a 21-month low of 90.4 points, down 20.1 per cent on a year ago.
• Four of the five major components of the index fell in May.
• Of the other key sub-components in May:
  • The ‘time to buy a dwelling’ index fell by 1.6 per cent to 77.5 points.
  • The ‘house price expectations’ index dipped by 9.4 per cent to 121.4 points.
  • The ‘unemployment expectations’ index rose (deteriorated) by 10.5 per cent to 109.6 points
• The survey was taken over the period May 1–5, 2022.

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• The ANZ-Roy Morgan consumer confidence index rose by 1.3 per cent to 94.6 in the past week.
• Commonwealth Bank (CBA) economists reported the Household Spending Intentions (HSI) index rose by 9.2 per cent in March to a record high of 117.1, led higher by gains for transport, travel, retail and household services.
• The CBA’s latest credit and debit card spending data showed increased spending in all regions for the week ending April 8, signalling continuing strength in the household sector despite higher Covid-19 case numbers.

What does it all mean?

• The latest survey from ANZ and Roy Morgan shows that consumer confidence improved for second successive week, up by 1.3 per cent to 94.6 points. But the number of pessimists still outweighs the number of optimists, with the index below the 100-point neutral mark.
• ANZ economists reported that confidence rose most in Western Australia (up 10.4 per cent) and NSW (up 6.1 per cent) in the past week. But sentiment fell in South Australia (down 10.7 per cent), Victoria (down 1.3 per cent) and Queensland (down 0.2 per cent).
• All five ANZ-Roy Morgan consumer confidence sub-indexes lifted last week, led by a pick up in consumer views on ‘future economic conditions’ (up 1.8 per cent) and ‘current financial conditions’ (up 1.1 per cent). And household views on whether it is a good ‘time to buy a household item’ lifted by 1.6 per cent.
• Yesterday, the Australian Institute of Petroleum (AIP) said that national average retail unleaded petrol price fell by a record 19.1 cents to 174.3 cents a litre last week. The big drop in international crude oil prices was the biggest factor behind the fall in pump prices. And the East Coast retail petrol price discounting cycle combined with the fall in excise fuel tax announced in the budget, were also likely contributors to falling fuel costs.
• Unleaded pump prices are down 38.2 cents from record highs of 212.5 cents a litre in the week ended March 20. In response, ANZ and Roy Morgan’s measure of consumer inflation expectations over the next two years fell from a 9½-year high of 6.4 per cent in the week ended March 27 to 5.8 per cent in the week ended April 3.
• Household inflation expectations were unchanged last week, despite the continued fall in petrol prices, with perhaps consumers becoming more aware of rising food prices after the UN FAO Food Price Index hit a record high in February. Food prices have been driven up by natural disasters, low supplies, the Ukraine war and rising shipping costs. Prices have increased most for vegetable oil, dairy, cereals and meat.
• Despite this, Aussie household spending is still being supported by a strong labour market and excess savings amassed during the pandemic. According to APRA, deposits from households increased by $6.1 billion in February (latest data) to a record $1,243.9 billion, up by 11.6 per cent on a year ago. Households have accumulated $254.7 billion worth of savings during the pandemic (since February 2020).
• The federal government also announced $39 billion worth of additional spending measures in the March 29 budget, with policies targeting rising household cost of living pressures.
• The Commonwealth Bank’s (CBA) household credit and debit card data for the week ending April 8 shows that spending rose in the past fortnight, with all regions recording gains, despite higher Covid-19 case numbers. And in another positive sign for retailers ahead of the Easter holidays, the CBA’s latest Household Spending Intentions (HSI) Index hit a record high in March, led by gains in transport, travel, retail and household services.
• While spending remains robust, a recent survey by the Australian Bureau of Statistics (ABS) shows that 59 per cent of retail businesses expect to increase the prices of their goods and services over the next three months, amid rising fuel costs, staff shortages and supply chain bottlenecks.

What do you need to know?

Consumer sentiment – Week ended April 10

• The weekly ANZ-Roy Morgan consumer confidence index rose by 1.3 per cent to 94.6 (long-run average since 1990 is 112.4).
• All five major sub-components rose last week.

The Commonwealth Bank (CBA) Household Spending Intentions Series (HSI) – March

• Commonwealth Bank (CBA) economists reported the Household Spending Intentions (HSI) index rose by 9.2 per cent in March to a record high of 117.1, led higher by gains for transport, travel, retail and household services.
• The highlights of the March HSI include:
  • “The Transport index is up a very strong 31.8 per cent in March and is now 9.4 per cent higher than March last year.
  • The Travel index rose a strong 18 per cent in March and is up a very strong 43.7 per cent compared to March 2021.
  • The Retail index rose 12.9 per cent in March, recovering some of the lost ground of January and February on a seasonal improvement.
  • The Household services index was up a solid 10.8 per cent in March and is now 12 per cent higher on the year.”

Commonwealth Bank (CBA) card spending – Week ended April 8

• According to CBA economists, “CBA’s internal household spending card data for the week ending 8 April signals continuing strength in the household sector. In the fortnight to 8 April, spending growth in all states rose indicating that higher COVID caseloads have not materially dampened overall spending. In the fortnight, South Australia recorded the strongest pick‑up with all other states also showing spending has significant momentum.”
• And, “Nationally by industry, spending growth on transport fell in the week to 8 April, coinciding with the cut in the fuel excise announced in the Federal Budget. Education spending surged though it is dependent on the timing of university fee due dates, making it volatile. Spending on clothing and footwear continues to be elevated. Recreation remains strong though it has levelled off at elevated levels after recent momentum. Dining and drinking out edged lower though remain at elevated levels, and online spending has been stronger than in‑store over the last month with COVID case numbers at relatively high levels nationwide.”

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• The CoreLogic Home Value Index of national home prices rose by 0.7 per cent in March. Home prices are up 18.2 per cent over the year. Capital city home prices lifted 0.3 per cent in March, the equal slowest pace since October 2020. Regional home prices lifted 1.7 per cent with growth strongest in South Australia (up 2.8 per cent).
• Across the regions, 74 out of the 88 SA4 regions recorded higher home prices in March. Home prices rose by the most in South Australia – South East (up 3.2 per cent), followed by Southern Highlands, NSW and Barossa – Yorke – Mid North, South Australia (both up 3.0 per cent). But home prices fell 1.7 per cent in Sydney – Northern Beaches, NSW and 1.4 per cent in Sydney – Eastern Suburbs, NSW.
• The AiGroup Australian Performance of Manufacturing Index (PMI) for manufacturing rose by 2.5 points to 55.7 in March. And the final IHS Markit Australia Manufacturing PMI lifted from 57.0 to 57.7 in March. Readings over 50 denote an expansion in activity.

What does it all mean?

• The pace of Aussie home price growth continues to moderate with the CoreLogic Home Value Index up by 0.7 per cent in March. Capital city home prices rose by just 0.3 per cent in the month – the equal slowest pace in 17 months (since October 2020). But regional home prices are outperforming, up by 1.7 per cent in March, with strong growth recorded in South Australia (up 2.8 per cent), Queensland (up 2.0 per cent) and NSW (up 1.8 per cent). In fact, across the regions, 74 out of the 88 SA4 Aussie regions recorded higher home prices in March.
• The divergence in home prices is most evident in the capital cities, with the largest by population – Sydney (down 0.2 per cent) and Melbourne (down 0.1 per cent) – both experiencing falls in prices for the first time together since September 2020. Of course, both cities dominate price declines at an SA4 level: Sydney – Northern Beaches (down 1.7 per cent); Sydney – Eastern Suburbs (down 1.4 per cent); Sydney – City and Inner South (down 1.0 per cent); Melbourne – Outer East (down 0.7 per cent); and Melbourne – North East (down 0.6 per cent).
• But Australia’s property market continues to diverge, with home prices in both Brisbane and Adelaide outpacing the national average. Brisbane home prices rose by 2.0 per cent in the month to be up by a whopping 29.3 per cent over the year to March. Brisbane’s outer suburban regions continue to outperform, due to better relative affordability, with SA4 regions Moreton Bay – North (up 2.9 per cent) Ipswich (up 2.9 per cent) and Logan – Beaudesert (up 2.7 per cent) amongst Australia’s best performing housing markets in March.
• And Adelaide home prices were up 1.9 per cent in March to be 26.3 per cent higher than a year ago – the most since the CoreLogic records began in January 1993. At a regional SA4 level, South Australia – South East (up 3.2 per cent) and Barossa – Yorke – Mid North (up 3.0 per cent) were very strong regional performers in March.
• Record low interest rates, elevated household savings, strong interstate migration, better relative affordability, limited detached housing supply, fewer Covid disruptions, solid government infrastructure spending and a tight rental market are all supporting home price appreciation in both Brisbane and Adelaide.
• Over 2022, the divergence in home prices between detached houses and other dwellings, such as apartments and townhouses, could narrow amid affordability constraints, an expected worker return to offices in CBDs, and the return of international students and skilled migrants.
• The take-up of fixed mortgages at record low rates during the pandemic is expected to cushion the blow for some homeowners from an expected lift in borrowing costs. But demand for new home loans could ease as fixed home loan rates are adjusted upwards on growing expectations of official cash rate rise in June 2022.
• And regulators will continue to keep a close eye on the pace of both new home lending and the stock of credit, as well as lending at high debt-to-income ratios and loan-to-valuation ratios, which combined are expected to slow housing credit growth. Home loan servicing buffers have already been increased with additional macroprudential tightening likely.
• In the near-term, homebuyers, investors and sellers should be on the lookout for signs of property market weakness. Areas to watch include weaker auction clearance rates; higher advertised stock levels; a lengthening in days a home is advertised on the market; and increased levels of home price discounting. Already, CoreLogic have reported, “National housing turnover is also easing, with preliminary transaction estimates for the March quarter tracking 14.3 per cent lower than the same period in 2021.”
• On the rental market, CoreLogic reported that the quarterly pace of national rents growth picked up to 2.6 per cent in the March quarter, driven by seasonal factors, with the annual growth rate easing to 8.7 per cent. Rental growth was firmer for apartments (up 3.0 per cent) when compared to houses (up 2.4 per cent) over the March quarter.
• For investors, total returns on national dwellings rose by 21.3 per cent in the year to March, easily outperforming the S&P/ASX All Ordinaries Accumulation Index, which advanced 15.5 per cent.

What do you need to know?

Home prices – March

• The CoreLogic Home Value Index of national home prices rose by 0.7 per cent in March. Home prices are up 18.2 per cent higher over the year.
• Across all capital cities, home prices lifted by 0.3 per cent – the equal slowest pace in 17 months – to be up 16.3 per cent over the year to March.
• National house prices climbed 0.8 per cent and apartment prices rose by 0.3 per cent – the equal slowest pace for units in 14 months. House prices were up 20.2 per cent on a year ago and apartment prices climbed 11.4 per cent.
• Home prices were up in six out of eight capital cities in March: Sydney (-0.2 per cent); Melbourne (-0.1 per cent); Brisbane (+2.0 per cent); Adelaide (+1.9 per cent); Perth (+1.0 per cent); Hobart (+0.3 per cent); Darwin (+0.8 per cent); and Canberra (+1.0 per cent).
• Home prices were higher than a year ago in all eight capital cities in March: Sydney (+17.7 per cent); Melbourne (+9.8 per cent); Brisbane (+29.3 per cent); Adelaide (+26.3 per cent); Perth (+7.0 per cent); Hobart (+22.3 per cent); Darwin (+10.6 per cent); and Canberra (+21.6 per cent).
• Regional home prices advanced 1.7 per cent to be up 24.5 per cent on the year. House prices also lifted 1.7 per cent to be up 24.8 per cent on the year. Unit prices rose 1.7 per cent in the month to be up 22.9 per cent on the year.
• Total returns on national dwellings rose by 21.3 per cent in the year to March, outperforming the S&P/ASX All Ordinaries Accumulation Index, which advanced 15.5 per cent.

Purchasing Managers’ indexes (PMIs) – March

• The AiGroup Australian Performance of Manufacturing Index (PMI) for manufacturing rose by 2.5 points to 55.7 in March. Readings over 50 denote an expansion in activity.
• According to the AiGroup, “Five of the six manufacturing sectors included in the Australian PMI reported positive trading conditions (results over 50 points, seasonally adjusted) during March, with buoyant conditions reported by manufacturers in the machinery & equipment, building materials, and TCF, paper & printing products sectors. The large food & beverage sector remained in contraction in March.”
• And the final IHS Markit Australia Manufacturing PMI lifted from 57.0 to 57.7 in March. IHS Markit economists noted that, “Manufacturing sector growth improved in March according to the latest S&P Global Australia Manufacturing PMI, supported by robust demand conditions. Despite a renewed rise in COVID-19 cases and domestic flooding disruptions, manufacturing production remained resilient.
• That said, supply constraints became more profound in March with the deterioration in vendor performance and both manpower and input shortages reported. The negative consequences of the Ukraine war also showed up across both price and delivery times indicators.
• Supply issues may also be further aggravated going forward with interests amongst manufacturers to build safety stock, which is a trend worth watching. Overall sentiment remained positive, but sunk to the lowest since July 2021.”

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