• There is yet more evidence that the housing market is taking over as the key economic driver of the economy. The value of home loans lifted to record highs in December as investors continued to shift their affections from bank deposits to property ownership. In addition the value of all Aussie homes lifted by 8.6 per cent in 2013 boosting wealth and supporting spending.
• The latest housing data showed a consolidation in housing loans in January. However the key is the new home building market and on that front the increase in construction loans is the jewel in the crown. Loans to build new homes have risen for 11 out of the past 13 months and are up almost 15 per cent on a year ago. An ongoing lift in construction finance is beneficial for the broader economy given that it is a key forward looking indicator. More homes being built over the medium term will provide additional support to overall economic growth while also increasing housing supply, and keeping a lid on aggressive house price growth.
• And with interest rates low, population rising and housing affordability still attractive, housing is best placed to take over the leadership role from mining as the nation’s key economic driver. The ongoing lift in housing approvals, rising new home sales and higher house prices will support confidence and provide policymakers with a degree of encouragement.
• Businesses are certainly feeling a lot chipper about life. Not only are business confidence levels healthy but actual business conditions have gone from strength to strength and are now holding at the best levels in almost three years. It is clear that the healing process is underway and Aussie businesses are noticing much more favourable conditions.
• One of the key reasons that businesses are feeling more confident is that order books are starting to fill up. Forward orders lifted in January to the best levels in four years. And while profitability eased, it was from the fastest pace in 33 months. In addition the lift in retail prices suggests that retailers are finally able to pass on higher costs to consumers – a result that should improve margins in coming months. The Commonwealth Bank Business Sales Index confirmed similar trends in recent months with solid growth in broad-based economy wide spending. No doubt the low interest rate environment, increase in housing activity and lift in retail spending are all contributing to the improvement in business activity and overall profitability.
• The Reserve Bank would be encouraged by the way the economic recovery is panning out. The lower Australian dollar is helping with the structural rebalancing across the domestic economy, while consumers and businesses are starting to feel more confident to spend. Importantly, if the lift in business profitability and conditions is sustained in coming months, it should translate to a lift in employment. CommSec expects employment growth to lift towards mid-2014. Interest rates look likely to remain unchanged over the medium term.

What do the figures show?

Housing Finance:

• The number of new owner-occupier housing loans fell by 1.9 per cent in December, just the second fall in the past 11 months. Housing finance commitments are up 14.1 per cent on a year ago.
• Excluding the refinancing of dwellings, loans were down 1 per cent in January.
• The number of loans for the construction of homes rose by 0.4 per cent in December – the 11^th rise in 13 months. The value of construction loans fell by 0.2 per cent in December.
• The number of loans to buy newly-erected dwellings fell by 1.9 per cent and the value of loans fell by 3.8 per cent.
• The number of loans for the purchase of established dwellings excluding refinancing fell by 1.2 per cent and the value of loans fell by 0.8 per cent in December.
• The number of refinancing transactions fell by 3.7 per cent while the value of transactions fell by 2.9 per cent.
• The value of new housing commitments (owner occupier and investment) rose by 0.2 per cent in December after a 2.2 per cent increase in November. Owner-occupier loans fell by 1.5 per cent while investment loans rose by 2.9 per cent.
• The proportion of first home buyers in the market rose from a record low 12.3 per cent to 12.7 per cent in December, but remains well below the long-term average of 20.0 per cent. Fixed rate loans fell from 17.4 per cent to 16.8 per cent of all loans in December. And the average home loan across Australia stood at $322,100 in December, up 4.5 per cent on a year ago.

National Australia Bank Business Survey:

• The NAB business confidence index rose from +6.3 points to +7.8 points in January. The business conditions index improved from +3.4 points to a 34-month high of +4.4 points.
• The index of trading conditions weakened from +11.7 points to +7.5 points; employment weakened from minus 4.1 points to +0.8 points; profitability weakened from +4.8 points to +3.3 points; and forward orders improved from minus 2.0 points to +5.7 points – a four year high.
• Inflationary pressures increased in January with labour and purchase costs rising at a faster pace than prices. The monthly reading of labour costs rose at a 1.2 per cent quarterly rate in January after a 0.6 per cent rise in December. And purchase costs rose at a 1.2 per cent quarterly rate in January, after a 0.8 per cent rise in December. Prices rose by 0.6 per cent after a 0.3 per cent rise in December. Retail prices rose at a 0.5 per cent quarterly rate in January, up from 0.2 per cent in December.
• Capacity utilisation lifted from 80.2 per cent in December to 80.6 per cent in January, but below the long-term average of 81.2 per cent.
• The proportion of firms reporting that they did not require credit fell from around 72 per cent in December to around 70 per cent in January.

ABS Residential Property Prices

• The average value (mean) of all residential homes rose by 8.6 per cent over 2013 to $539,400. While the number of homes rose by 1.5 per cent to 9.3 million.

What is the importance of the economic data?

• The monthly National Australia Bank business survey is valuable in providing a timely reading on the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
• Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
• The latest business survey is certainly encouraging. Confidence and conditions are both lifting, while the order book and profitability looks a lot healthier than a few months ago. If the improvements are sustained it should translate through to healthy growth in employment over the medium term.
• Investors remain keen about putting their money to work in the housing market. Certainly there are plenty of grounds for optimism with rising population, low interest rates, government grants for new construction and tight housing markets.
• The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity more generally. It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.
• But while investors are keen to pick up attractive income-producing assets, first home buyers are still reticent to wade in. Despite some of the most attractive buying conditions in years, the proportion of first home buyer loans has lifted from the lowest level on record. There is anecdotal evidence that some first home buyers are being squeezed out by investors given tight housing supply. But the lower numbers of first home buyers also reflects the preference for young people to rent, rather than buy.

What are the implications for interest rates and investors?

• The latest business survey is certainly encouraging. Confidence and conditions are both lifting, while the order book and profitability looks a lot healthier than a few months ago. If the improvements are sustained it should translate through to healthy growth in employment over the medium term.
• Investors remain keen about putting their money to work in the housing market. Certainly there are plenty of grounds for optimism with rising population, low interest rates, government grants for new construction and tight housing markets.
• The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity more generally. It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.
• But while investors are keen to pick up attractive income-producing assets, first home buyers are still reticent to wade in. Despite some of the most attractive buying conditions in years, the proportion of first home buyer loans has lifted from the lowest level on record. There is anecdotal evidence that some first home buyers are being squeezed out by investors given tight housing supply. But the lower numbers of first home buyers also reflects the preference for young people to rent, rather than buy.

• In recent months the housing sector has shown that it is the shining light of the Australian economy. And with interest rates low, population rising and housing affordability still attractive, housing is best placed to take over the leadership role from mining as the nation’s key economic driver. The ongoing lift in housing approvals, rising new home sales, higher house prices will support confidence and provide policymakers with a degree of encouragement.
• But while investors are keen to pick up attractive income-producing assets, first home buyers are still reticent to wade in. Despite some of the most attractive buying conditions in years, the proportion of first home buyer loans is holding at the lowest level on record. There is anecdotal evidence that some first home buyers are being squeezed out by investors given tight housing supply. But the lower numbers of first home buyers also reflects the preference for young people to rent, rather than buy.
• While the rise in overall housing finance is positive, the key is the new home building market and the increase in construction loans is the jewel in the crown. Loans to build new homes have risen for ten out of the past 12 months and are up almost 17 per cent on a year ago. An ongoing lift in construction finance would be beneficial for the broader economy given it is a key forward looking indicator. More homes being built over the medium term will provide additional support to the overall economic growth while also increasing housing supply, and keeping a lid on aggressive house price growth.
• According to the official data, the national petrol price slumped by 3.7 cents last week. And while that may have been partially due to the vagaries of the discounting cycle, motorists would take cheaper prices where available – particularly given that the national average price was holding at 5½-year high.
• And the good new doesn’t end there. Global fuel prices have recorded a sustained fall over the past 10 days, while the Aussie dollar has managed to strengthen modest. The wholesale price has fallen by around 2.5 cents in the past week and it should filter through to domestic pump prices in the next couple of weeks. CommSec expects fuel prices to fall by another 2 cents over the next 7-10 days.
• Interestingly the discounting cycle is nearing the trough (low point) across most capital cities, and should jump sharply higher in the next couple of days. At present motorists in Sydney, Melbourne, Brisbane and Adelaide can buy fuel, with the help of shopper dockets at or below cost price. The bottom line is motorists would be best served filling up the vehicle now, before prices spike higher.

What do the figures show?

Housing Finance:

• The number of new owner-occupier housing loans rose by 1.1 per cent in November, the tenth increase in the past 11 months. Housing finance commitments are up 15.3 per cent on a year ago.
• Excluding the refinancing of dwellings, loans were flat in November.
• The number of loans for the construction of homes rose by 2.3 per cent in November – the 10^th rise in 12 months. The value of construction loans rose by 1.5 per cent in November.
• The number of loans to buy newly-erected dwellings fell by 4.3 per cent and the value of loans rose by 2.7 per cent.
• The number of loans for the purchase of established dwellings excluding refinancing rose by 1.2 per cent and the value of loans were flat in November.
• The number of refinancing transactions rose by 1.7 per cent from record highs while the value of transactions rose by 2.8 per cent.
• The value of new housing commitments (owner occupier and investment) rose by 1.7 per cent in November after a 3.7 per cent increase in October. Owner-occupier loans rose by 1.9 per cent while investment loans rose by 1.5 per cent.
• The proportion of first home buyers in the market fell from 12.6 per cent to a record low of 12.3 per cent in November, and remains well below the long-term average of 20.0 per cent. Fixed rate loans rose from 16.6 per cent to 17.4 per cent of all loans in November. And the average home loan across Australia stood at $319,200 in November, up 4.0 per cent on a year ago.

Petrol prices:

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 4 cents a litre to 154.1 c/l in the week to January 12. The metropolitan price fell by 5.9 c/l to 152.8 c/l, while the regional average price fell by 0.1 c/l to 156.7 c/l.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 10.0 cents to 149.6 c/l), Melbourne (down by 5.6 cents to 150.6 c/l), Brisbane (down 5.2 cents to 157.1 c/l), Adelaide (down 9.7 cents to 149.8 c/l), Perth (up 0.7 cents to 155.7 c/l), Darwin (up 0.3 cents to 172.9 c/l), Canberra (fell by 0.4 cents at 158.9 c/l) and Hobart (up 0.3 cents to 162.3 c/l).
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 145.80 c/l, down 2.5 cents a litre over the week and but still up almost 12 cents since the lows in early November.
• Last week the key Singapore unleaded petrol price fell by US$1.80 (1.5 per cent) to US$117.40 a barrel. But in Australian dollar terms the Singapore gasoline price fell by 87 cents last week to $131.84 a barrel or 82.92 cents a litre.
• Figures from MotorMouth show that petrol prices are at their low point in the discounting cycle across most capital cities currently, before lifting in the next couple of days.

Job advertisements:

• The combined number of internet and newspaper job advertisements, as tracked by ANZ, fell by 0.7 per cent in December to stand 9.1 per cent lower than a year ago. Job ads on the internet eased 0.7 per cent and were down 8.3 per cent on the year. Newspaper ads rose by 0.4 per cent, to be down 27.4 per cent on the year. Newspaper advertisement account for less than 5 per cent of overall job ads.
• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
• Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
• The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• Investors remain keen about putting their money to work in the housing market. Certainly there are plenty of grounds for optimism with rising population, low interest rates, government grants for new construction and tight housing markets.
• The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity more generally. It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.

What is the importance of the economic data?

• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
• Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
• The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.

What are the implications for interest rates and investors?

• Investors remain keen about putting their money to work in the housing market. Certainly there are plenty of grounds for optimism with rising population, low interest rates, government grants for new construction and tight housing markets.
• The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity more generally. It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.

What does it all mean?

• Apparently Australian borrowers haven’t had it this good for over 50 years. But you wouldn’t know it from looking at the home loan data. While there has been an encouraging lift in new lending over 2013, the value of all new loans still is over 4 per cent below the highs set five years ago.
• In short, borrowers remain cautious – especially first home buyers. Despite some of the most attractive buying conditions in years, the proportion of first home buyers in the market is still well down on the average levels recorded over the past 22 years.
• The good news is that more people are taking out loans to build new homes rather than buying established properties. The revised grants from state governments are helping to lift construction, as is the low level of interest rates.
• Once the election is out of the road, we would expect more people to seriously contemplate buying homes to either live in or as a form of investment. Certainly interest rates are low enough, affordability has improved, the population is growing and rental markets are reasonably tight across the country.

What do the figures show?

Housing Finance:

• The number of new owner-occupier housing loans rose by 2.7 per cent in June after a 1.7 per cent lift in May and was the sixth straight monthly lift in lending. Over the first six months of 2013 housing finance has increased by 13.8 per cent – the strongest start to a calendar year in four years. Housing finance commitments are up 12.7 per cent on a year ago.
• Excluding the refinancing of dwellings, loans were up 2.3 per cent in June after lifting by 2.1 per cent in May.
• The number of loans for the construction of homes rose by 0.9 per cent and the value of loans rose by 0.7 per cent.
• The number of loans to buy newly-erected dwellings rose by 0.2 per cent but the value of loans fell by 0.2 per cent.
• The number of loans for the purchase of established dwellings excluding refinancing rose by 2.8 per cent and the value of loans was up by 0.8 per cent.
• The number of refinancing transactions rose by 3.8 per cent and the value rose by 5.7 per cent.
• The value of new housing commitments (owner occupier and investment) rose by 1.2 per cent in June after lifting by 1.8 per cent in May. Owner-occupier loans rose by 2.1 per cent in June but investment loans fell by 0.5 per cent – only the first fall in six months.
• The proportion of first home buyers in the market rose from 14.6 per cent to 15.1 per cent in June but is still down on the long-term average of 20.0 per cent. Fixed rate loans eased from 19.1 per cent of all loans to 17.8 per cent in June. And the average home loan across Australia stood at $304,300 in June, up 0.9 per cent on a year ago.
• Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
• More home loans being taken out will equate to more homes being bought and more homes being built. So housing is well placed to provide a boost to the economy and take over growth leadership from mining.
• The value of committed home loans that haven’t been taken up as yet stands at a four-year high of almost $24 billion, up 16.3 per cent over the year. So buyers are armed with cash; they just need the confidence to act.
• Stronger housing activity is positive for banks, home builders, developers, retailers and building material suppliers.
• Those with mortgages are taking advantage of low interest rates to refinance their loans, unlocking purchasing power, and representing good news for retailers.

Why is the data important?

• Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

What are the implications?

• More home loans being taken out will equate to more homes being bought and more homes being built. So housing is well placed to provide a boost to the economy and take over growth leadership from mining.
• The value of committed home loans that haven’t been taken up as yet stands at a four-year high of almost $24 billion, up 16.3 per cent over the year. So buyers are armed with cash; they just need the confidence to act.
• Stronger housing activity is positive for banks, home builders, developers, retailers and building material suppliers.
• Those with mortgages are taking advantage of low interest rates to refinance their loans, unlocking purchasing power, and representing good news for retailers.