Financial Accounts; Population; Job Vacancies; Final Budget Outcome

• Household wealth stood at a record $7,780.6 billion at the end of June, up $97.4 billion or 1.3 per cent over the quarter. In per capita terms, wealth rose to a record $330,841 in the June quarter, up $2,860 over the quarter
• Population: Australia’s population grew by 111,500 people over the March quarter to 23,452,700. Annual population growth eased from 1.72 per cent to 1.69 per cent. Population growth is above decade averages in just NSW (32 per cent above decade averages) and Victoria (14 per cent above decade averages).
• Baby boom: In the year to March, 306,500 babies were born, just shy of the record 312,200 babies born in the year to September 2013. A total of 231,500 people migrated to Australia over year to March, well off the low of 172,100 in the year to December 2010.
• Job vacancies: Job vacancies fell by 0.7 per cent in the three months to August – the first fall in three quarters. Job Vacancies are up 4.1 per cent on a year ago.
• The final Federal Budget deficit for 2013/14 was $48.5 billion. The result was inflated by the contribution to bolster the Reserve Bank’s balance sheet.
• The Reserve Bank Governor was a panel discussant at the Melbourne Economic Forum. The Governor once again reiterated the concerns about the lift in house prices and “unbalanced” investor demand. The Governor was sceptical about using macroprudential tools “as a panacea” but is open to using them to ensure sustainable housing and  lending practices.

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• Industry employment: Employment rose by 14,400 over the three months to May – the smallest quarterly increase in three quarters but after strong gains in the previous six months.
• Shift in rankings: The Professional, Scientific and Technical Services sector is now the fourth biggest employer in Australia, moving past Manufacturing for the first time.
• Employment rose in 9 of the 19 industry sectors. The largest job gains was in Professional, Scientific and Technical Services (up 47,000), followed by Rental, Hiring and Real Estate Services (up 29,000).
• Population: Australia’s population 1.73 per cent over the year to December 2013, down from 1.78 per cent in the year to September. Australia’s population stood at 23,319,385 people at the end of December 2013.
• NSW Population lifts:  The NSW population grew by 1.5 per cent in the year to December, the fastest in four years and underpinning the lift in the economy over the past year. Tasmania’s population is growing at the fastest rate in two years.

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• 

  Australia’s population set to exceed 70 Million by the end of the century.

  New population projections: The Bureau of Statistics believes Australia’s population could reach 70 million people in 2101. Five years ago, the ABS estimated that the population could hit 62.2 million in 2101. Melbourne could have a larger population than Sydney in 2030. And Perth could have a larger population than Brisbane in 15 years.

• Productivity challenge: Reserve Bank Deputy Governor Philip Lowe delivered a speech: “Productivity and Infrastructure”.
• Imports fall, prices rise: Imports of goods fell by 2.4 per cent in real terms in the September quarter. Imports prices (implicit price deflators) rose by 6.3 per cent.

What does it mean?

• In the space of five years, the Bureau of Statistics has found an extra 8 million people. In 2008, the ABS reckoned Australia’s population could hit 62.2 million in 2101. Now it estimates a figure of 70 million.
• In the next 90 odd years could Australia have a population of over 70 million? The Bureau of Statistics reckons there is a chance, but it would require high fertility levels of around 2 babies per woman and annual migration levels near 280,000 a year. The latest projections are important for policymakers, especially planners, as well as businesses to do some scenario or ‘what if’ work.
• Could Melbourne take over as Australia’s most populous city? Using the high population assumptions (series A) and medium (series B) assumptions, “Melbourne is projected to become the most populous, exceeding Sydney’s population in 2030 and 2053, respectively.”
• Using series B, the ABS finds “The population of Perth is projected to overtake that of Brisbane in around 15 years’ time, when they both reach 3 million people in 2028.”
• No matter which of the three assumptions is chosen by the ABS, Australia’s population is projected to increase. And that is notable as the ABS observes: “In contrast to the 2004-based set of ABS population projections released in November 2005, no series shows population decline for Australia before the end of the century.”
• Reserve Bank Deputy Governor Philip Lowe has provided a reality check for the ‘doom and gloom’ school: “the past two decades have been very good ones for the Australian economy.”Lowe says that “While not everybody in the community has benefited equally, there has been a very substantial improvement in our average standard of living since the early 1990s.”
• But Lowe has provided a reality check for the ‘blue skies’ school as well: “Looking forward, it is unlikely that these favourable developments will be repeated.” In short a lot has gone right over the past decade, but there are now challenges in maintaining the good times.
• Still, Lowe is not downbeat. The aim in coming years should be to boost productivity and Lowe believes there is some basis for optimism. Inflation is under control and productivity has indeed lifted recently.
• Productivity speech: Reserve Bank Deputy Governor Philip Lowe has delivered a speech entitled “Productivity & Infrastructure”. http://www.rba.gov.au/speeches/2013/sp-dg-261113.html
• Lowe summed up the talk as follows: “In conclusion, Australia faces a significant challenge over the coming years. While our exports are set to grow strongly, we will need to lift our rate of productivity growth substantially if we are to continue to enjoy the type of increases in our living standards that we have become used to. Meeting this challenge will require innovation by both the private and public sectors. Infrastructure is just one of the many areas that can play a role here. But if we are to maximise the benefits of our investment in infrastructure, that investment needs to be surrounded by strong governance, sound financing and pricing arrangements and due regard to the capacity constraints in the economy.”
• Population projections: The ABS notes: “Australia’s population at 30 June 2012 of 22.7 million is projected to increase to between 36.8 million and 48.3 million in 2061, and reach between 42.4 million and 70.1 million in 2101.”
• There are three projections: In Series A, Australia experiences strong and consistent growth, reaching 48.3 million in 2061 and 70.1 million in 2101. In Series B, the population will reach 41.5 million in 2061 and 53.6 million in 2101. In Series C, growth is projected to be lower, with the population reaching 36.8 million in 2061 and 42.4 million in 2101.
• Imports: The ABS report that imports of goods fell by 2.4 per cent in real terms (volume of goods imported fell) in response to a 6.3 per cent lift in prices.
• The latest population projections are important for long-term planning, especially by government but also private businesses, utilities, housing agencies, health and emergency services.
• The game has changed, and it is a case of everyone now updating their figures and debating the new circumstances. What sort of Australia do we want over the next 90 years?
• Just like the population data, the productivity and infrastructure challenges for Australia exist in the medium-term rather than short-run.

What are the details?

• Productivity speech: Reserve Bank Deputy Governor Philip Lowe has delivered a speech entitled “Productivity & Infrastructure”.
• Lowe summed up the talk as follows: “In conclusion, Australia faces a significant challenge over the coming years. While our exports are set to grow strongly, we will need to lift our rate of productivity growth substantially if we are to continue to enjoy the type of increases in our living standards that we have become used to. Meeting this challenge will require innovation by both the private and public sectors. Infrastructure is just one of the many areas that can play a role here. But if we are to maximise the benefits of our investment in infrastructure, that investment needs to be surrounded by strong governance, sound financing and pricing arrangements and due regard to the capacity constraints in the economy.”
• Population projections: The ABS notes: “Australia’s population at 30 June 2012 of 22.7 million is projected to increase to between 36.8 million and 48.3 million in 2061, and reach between 42.4 million and 70.1 million in 2101.”
• There are three projections: In Series A, Australia experiences strong and consistent growth, reaching 48.3 million in 2061 and 70.1 million in 2101. In Series B, the population will reach 41.5 million in 2061 and 53.6 million in 2101. In Series C, growth is projected to be lower, with the population reaching 36.8 million in 2061 and 42.4 million in 2101.
• Imports: The ABS report that imports of goods fell by 2.4 per cent in real terms (volume of goods imported fell) in response to a 6.3 per cent lift in prices.

What are the implications?

• The latest population projections are important for long-term planning, especially by government but also private businesses, utilities, housing agencies, health and emergency services.
• The game has changed, and it is a case of everyone now updating their figures and debating the new circumstances. What sort of Australia do we want over the next 90 years?
• Just like the population data, the productivity and infrastructure challenges for Australia exist in the medium-term rather than short-run.

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In brief:

Net immigration is the biggest driver of population growth. The birth rate has picked up recently.

• Australia’s population rose by 94.1k in QIV to 22,906 million. It is a solid 394.2k, or 1.8%, higher than a year ago.
• The natural increase (births less deaths) was 158.3k in 2012. There were 305.4k births and 147.1k deaths.
• Net overseas migration was 235.9k in 2012.
• Natural increase contributed 40% of the population rise over the past year and net migration contributed 60%.
• In annual growth terms, WA continued to record the fastest population growth of all States, with an increase of 3.5%.
• The resource rich state accounts for 10.8% of the total population.
• Over 2012, there were 147k residential.

To read the full update click here.

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US Monetary Policy; Population; Employment by industry

• ¾ US Monetary Policy: Federal Reserve chairman Ben Bernanke has signalled a new phase for the US economy. But bond buying (printing cash) won’t end any time soon.
• ¾ Population: Australia’s population grew by 1.75 per cent over the year to December – the fastest rate in three years.
• ¾ Industry employment: Employment rose by just 400 people in the three months to May after gaining 104,900 in the previous three months – the biggest quarterly gain in five years. Strongest sector in the May quarter was Retail trade (up 34,200) while Wholesale trade jobs fell by 32,000.
• ¾ Chinese economy: The ‘flash’ Purchasing Managers index in china for June was at a 9-month low of 48.3, down from 49.2 in May.

What do the figures show?

US Monetary Policy

• The Federal Reserve will continue to purchase debt at the rate of $85 billion a month and leave the official interest rate between zero and 0.25 per cent. But while the Fed chief Ben Bernanke hinted at an end to bond buying, he noted: “If you draw the conclusion that I’ve just said that our purchases will end in the middle of next year, you’ve drawn the wrong conclusion, because our purchases are tied to what happens in the economy.”

Demographic Statistics

Employment to May 2013

• Australia’s population grew by 1.75 per cent over the year to December – the fastest rate in three years. Australia’s population stood at 22,906,352 people at the end of December, but six months later the figure is most likely around 23.1 million.
• A record 305,400 babies were born over 2012, up 2.2 per cent over the year but deaths barely moved over the year to 147,000. Overseas migration totalled 235,900 in the 2012 calendar year, the biggest annual total in three years, but below the record high of 315,700 in the year to December 2008.
• Across the states and territories, fastest annual population growth occurred in Western Australia (3.47 per cent – fastest on record), followed by ACT (2.30 per cent), Queensland (2.05 per cent), Northern Territory (1.79 per cent), Victoria (1.78 per cent), NSW (1.25 per cent), South Australia (0.95 per cent) and Tasmania (0.08 per cent).

Employment by Industry

• Employment rose in 9 of the 19 industry sectors in the three months to May. Employment fell most in Wholesale Trade (down 32,000) after rising by 39,300 in the previous quarter. Next biggest fall was by Construction (down 20,300) followed by Transport, Postal and Warehousing (down 19,800). Biggest gain in
  

  Record Population WA May 2013

  jobs occurred in Retail Trade (up 34,200) followed by Public Administration and Safety (up 14,000) and Arts and Recreation Services (up 13,700).

• Healthcare remains the biggest employer with 1.40 million employees (12.1 per cent of the total) followed by Retail Trade (10.8 per cent) and Construction (8.6 per cent).

What is the importance of the economic data?

• Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.
• The Australian Bureau of Statistics (ABS) provides detailed labour market figures
  

  Revised population data May 2013

  one week after releasing ‘top level’ statistics of employment & unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy.

What does it all mean?

• Financial markets have over-reacted to the latest Fed decision. Rather than celebrating the fact that the US economy is starting to stand on its own two feet, investors are fretting about the end to cheap cash. The Dow Jones fell 206 points and the Aussie slumped against a stronger greenback to US93 cents.
• This is very much a knee-jerk reaction. The good news outweighs the bad.
  

  Baby boom May 2013

  And all the US economic problems haven’t been solved overnight. We are still tipping the Aussie dollar at US95c at end year and All Ordinaries at 5,200 points.

• Investors are also over-reacting to the Chinese PMI. The so-called ‘flash’ manufacturing gauge doesn’t line up well to the ‘official’ gauge of manufacturing activity. But if the Chinese economy requires stimulus, authorities are well placed to provide it with inflation controlled.
• Provided state and local governments respond to solid population growth then it represents good momentum for economies. That is happening. Businesses are in business because they want to grow and solid population growth assists in that growth.
• The job market is effectively flat-lining until the election is out of the way. The lift in retail jobs is clearly a big surprise.

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• Finally one of the great myths has been debunked. The Reserve Bank has finally acknowledged that housing affordability is not a major problem in Australia. Neither is it worsening dramatically, or alternatively going through the floor. Actually it has been going sideways for the last 5-6 years.
• The Reserve Bank has come to the view (actually a view CommSec has held for some time, and which we reiterated a fortnight ago) by assessing more complete figures on home prices. In the past economists had compared capital city home prices to incomes. But clearly a more accurate measure is to compare home prices in every town and region of Australia with incomes across the country. That analysis is made possible by figures from RP Data and Rismark and reveals that affordability has been flat since 2004.
• Some investors will say ‘so what?’ – what is the importance of the findings? Well, foreigners have been particularly concerned by the potential for a ‘housing bubble’ in Australia. That risk has now been defused so foreign investors will have less concern about parking their funds in Australia. So the effects may show up in a firmer sharemarket, but also it may take away another factor restraining our dollar from going higher.
• That, in turn, raises another issue for investors: what can stop the Aussie dollar? The greenback is on the nose and foreign investors are embracing currencies such as the Euro, Aussie dollar and other commodity currencies. But here in Australia, arguably the fundamentals are far stronger than in other parts of the globe. Our government debt is amongst the lowest of advanced nations; the economy continues to grow, buoyed by the Chinese and Indian economies; and speculation has again turned to the prospect of higher interest rates.
• But why the speculation about rate hikes? Certainly any balanced assessment of the latest data suggests that a rate hike should be the furthest thing on RBA policymaker minds. It all boils down to a fear of the economy again bumping up against capacity limits, causing a re-run of the inflation spike that was witnessed in 2008.
• Australia has never been able to get this one right. When we are perceived to be reaching our productive capacity – and note that this is basically a guess – we always opt to constrain demand rather than increase supply. If we need more workers, migration needs to rise. And if we need more capital, the Government and RBA should be identifying where the problems are with the Government providing greater incentives to businesses.

The week ahead

• After a quiet start to the week, more than half a dozen important statistics will be released from Wednesday together with the Reserve Bank’s half-yearly assessment of the health of the financial system.
• On Wednesday the latest data on population growth is released. Meanwhile on Thursday, job vacancies, building approvals, new home sales, private sector credit (lending) and the RP Data/Rismark home price index are all slated for release. The Reserve Bank also issues the Financial Stability Review on Thursday. And on Friday the Performance of Manufacturing index is issued.
• Population growth had been running at the fastest pace in 40 years, but it is eased in the December quarter and likely eased further in the March quarter based on the latest long-term arrivals data. Still population growth near 2 per cent is both historically high as well as being close to the fastest rate for any developed economy. Here’s hoping the new government recognises the importance of maintaining the current population growth pace.
• Of the other data CommSec expects that job vacancies lifted in the three months to August but home prices, building approvals and home sales remained soft in August. And the high Aussie dollar probably ensured that the Performance of Manufacturing index was only modestly above the 50 line that separates expansion from contraction in September.
• Building approvals probably rose by around 3 per cent in August, after only posting the first gain in four months in July. With new home sales already at 19-month lows, it is clear that the short-term outlook for the new home construction market is decidedly weak. Further home prices may have lifted by 0.4 per cent in August, suggesting that annual growth eased further to more ‘normal’ level of 8.7 per cent from 9.7 per cent in July. And credit growth probably rose 0.2 per cent in August keeping the annual rate historically low near 2.9 per cent.
• The Reserve Bank is clearly contemplating an interest rate hike In October, but another batch of weak housing and credit market indicators may give it second thoughts.
• In the US, again the coming week gets off to a slow start before picking up pace as the week progresses. On Tuesday consumer confidence and the Case-Shiller home price index are issued. And the Chicago purchasing managers index and final June quarter GDP figures are released on Thursday. Meanwhile on ‘Fabulous Friday’, at least four key indicators are released – the ISM manufacturing index, auto sales, construction spending and personal income & spending.
• Economists tip only a modest improvement in consumer confidence In September, from 53.5 to 54.0. But an increase is still an increase and it should ease some doubts on the global economy. And GDP growth should be confirmed at a 1.6 per cent annual pace in the June quarter – no surprises there.
• There will probably be more mixed signals from Friday’s data. Economists tip a modest easing in the manufacturing index and construction spending. But auto sales, personal income and spending are expected to have advanced in the latest readings. Overall it is clear that the US expansion is still intact but the jury is unlikely to be convinced that recession may not return.
• It is also worth pointing out that most of the global purchasing manager indexes are released on Friday, and that together, they provide a good guide to global economic growth. Especially keep a watch on the PMI for China.
• Sharemarket
• In a fortnight’s time, Alcoa will kick off yet another profit-reporting season in the US. Alcoa’s earnings are due on October 7 and will be followed by the likes of Intel, JP Morgan, Google and General Electric in the following week.
• The good news is that earnings guidance has been favourable to date. Over the past 30 days more than 120 companies have issued earnings guidance with 47 per cent expecting earnings in line with previous guidance while 34 per cent have upgraded estimates and only 19 per cent believe that earnings will miss forecasts.

Interest rates, currencies & commodities

• Strangely, views about a rate hike in October have dramatically shifted. A week ago no economic group tipped an October rate hike but now all and sundry believe it will occur. So what data has provoked the change? Actually recent domestic figures have been decidedly soft. In the US the Federal Reserve is still debating whether it needs to provide additional stimulus. The only area of strength has been the latest batch of Chinese economic data.

• Certainly the Reserve Bank Governor delivered a speech this week and minutes of the last Reserve Bank Board meeting were released. No surprises in either – the Reserve Bank has never made a secret of the fact that it believes further rate hikes are necessary. There has been one other factor though – a prominent financial journalist has signalled that a rate hike in October is now likely. Given his impeccable track record, market economists believe there is little alternative but to flag the risk of an October move. CommSec doesn’t believe that the RBA should be lifting interest rates, but flags the risk of the RBA lifting rates anyway.

• Our currency strategists have markedly changed their forecasts for the Aussie dollar. They now believe that the Aussie dollar will end the year at US97 cents and that parity with the greenback is possible in the first quarter of 2011. However the Aussie is expected to ease to US94 cents in late 2011 as the US economy lifts.

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• Based on the latest available government aviation statistics, the Melbourne-Sydney air route can claim the mantle of the third busiest route in the world. There were just over 834,000 available seats on the Melbourne-Sydney city pair, pushing it above the Fukuoka-Tokyo route in Japan.

Click here to download the document (pdf)

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