Expect an ongoing decline in the unemployment rate: Pete Wargent

EXPERT OBSERVATION 

Job vacancies surged to record highs in both New South Wales (82,400) and Victoria (72,000) last month as those states get set to enjoy an extraordinary hiring boom.

There were broad-based gains across a raft of industries, including professional and technical services, financial and insurance services, healthcare and social assistance, mining, construction, accommodation and food, transport, postal and warehousing, arts and recreational, administrative and support roles, education, and more. 

The ongoing resurgence in the mining sector helped to lift job vacancies in Western Australia (27,600) to the highest level in half a decade, while Queensland (35,100) and South Australia (11,900) have improved significantly over the past couple of years. 

The Tasmanian economy is also firing, with the Northern Territory potentially the one serious laggard. 

The trend in private sector vacancies scorched more than 20% higher over the year, while the trend annual increase in all sectors was 19.3%, taking the total number of vacancies to the highest ever level at 240,900. Goodness!

More hiring ahead

There will be some half-hearted attempts to talk down the result by the Opposition, but the facts don't lie: at under 3% the number of unemployed persons per job vacancy now has a two-handle for the first time since the mining boom...which is surely great to see.

Of course, the labour force has expanded significantly too as discouraged workers come back into the fold alongside record high female participation (the rise in dual income households being an under-appreciated boon for housing markets).

But even accounting for this the figures point to an ongoing decline in the unemployment rate towards 5%, and lower still for New South Wales and Victoria.

Hirin' now!

Overall, this release was very positive news, with the economy continuing to improve in the two most populated states, and the resources states generally now on the up too.

All this means that Australia has never had as many jobs to be filled as it does right now.

Good stuff.

The Hometrack UK 20 Cities House Price Index increased by a further 3.9% over the year to August 2018. 

It's been a wild week of bickering for Australian housing market commentary thanks to yet another (now-traditional) 60 Minutes beat-up.

But in the background the fundamentals of the economy quietly continue to improve: exports, tourism, government revenues and the Budget balance, hiring, engineering construction, and so on (resulting in a risk rating upgrade to AAA neutral). 

One of the neat things about our mortgage broker liaison is that since brokers take 'snapshots' in time, we can take a mortgage application from today and re-run it against the lending standards of yesteryear.

While the results do vary quite a bit, typically a home buyer applicant might see their borrowing capacity cut by about 10% from where things were a year ago due to tightened lending standards, while for some portfolio investors the equivalent figure can be much greater.

In fact, many portfolio investors simply won't be able to borrow at all in the present environment. 

On its own this probably won't have as big an impact on the housing market as some people think (cf. the United Kingdom, where tighter mortgage lending criteria have failed to stop house prices from rising to fresh highs in nominal terms).

Firstly, that's because home buyers don't always borrow the maximum amount permissible.

And secondly, it's because most investors don't own more than one or two properties - thus portfolio investors are only one small part of the pie, albeit an important one at the margin.

In fact, the average loan size is still being written at or around record highs, but in lower volumes now.

ANZ updated its somewhat more sober house price forecasts today, expecting prices to decline by just 2% in 2019 - a mere 20-fold improvement on the lame 60 Minutes offering - with a market peak-to-trough fall for Sydney and Melbourne expected of no more than 10%. 

ANZ also noted that it was more upbeat for the housing market prospects of Brisbane, Adelaide, and Canberra, as well as many of Australia's regional housing markets. 

Looking forward, the sheer strength of the hiring figures makes it hard to disagree with that assessment. 

PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.