Economic Data

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EXPERT OBSERVATION
Greater Sydney leads the way in the wages growth test tube, with its annual average unemployment rate falling to the lowest level since 2008, at just 4½ per cent in April 2018. 
Total employment in Sydney has exploded an ear-splitting +128,600 higher over the past year alone to a record high of 2¾ million.  
Just to put that in some perspective, only three years earlier total employment in Sydney was 2½ million, so the harbour city has been creating jobs at a truly thunderous rate. 
From an unemployment rate perspective Adelaide now takes out the most improved award, although the underlying labour force metrics in the South Australian capital are a tad uninspiring at best. 
<a href="https://1.bp.blogspot.com/-_j_1zgWgnfg/WwYbYRUTOCI/AAAAAAAAqL0/uvZVa8OylMI3l5Wrt6HEPKM9YBPoNL8CgCLcBGAs/s1600/A1.jpg"><img src="https://1.bp.blogspot.com/-_j_1zgWgnfg/WwYbYRUTOCI/AAAAAAAAqL0/uvZVa8OylMI3l5Wrt6HEPKM9YBPoNL8CgCLcBGAs/s640/A1.jpg" width="640" height="368" data-original-height="816" data-original-width="1413"></a>
In somewhat brighter news for employment hunters, the median duration of job search has improved very steadily over the past year, and that now includes for Greater Perth, after a very lean run.
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Finally for today, S&amp;P's Prime SPIN mortgage arrears came in at 1.18 per cent in March 2018, broadly unchanged from 1.16 per cent in February (and from 1.16 per cent a year earlier). 
<img src="https://3.bp.blogspot.com/-nI-KATQcaLI/WwYevbne3QI/AAAAAAAAqMc/9WVlNyzJbGMvR_TyUvhzBSvAmOIXsI8TwCEwYBhgL/s640/S%2526P%2Bactual.jpg" width="640" height="380" style="font-size: 12.16px;" data-original-height="810" data-original-width="1360">
From a macro perspective, then, nothing meaningful to report in terms of mortgage stress. 
Around the traps, only the figures Western Australia (2.37 per cent) revealed any actual signs of mortgage stress, with arrears either benign or falling in most states and territories. 
<a href="https://4.bp.blogspot.com/-2YBJy0jghMQ/WwYd_try7VI/AAAAAAAAqMU/c9lwxxF1AvAAIWCG2mQSDxyxLcCne0WvgCEwYBhgL/s1600/sanp%2Bpicture.jpg"><img src="https://4.bp.blogspot.com/-2YBJy0jghMQ/WwYd_try7VI/AAAAAAAAqMU/c9lwxxF1AvAAIWCG2mQSDxyxLcCne0WvgCEwYBhgL/s400/sanp%2Bpicture.jpg" width="400" height="370" data-original-height="1483" data-original-width="1600"></a>
 
Source: S&amp;P Global 
Stress at the margin 
There's a lot of debate about mortgage stress at the moment, with some people seemingly almost willing the figures to run higher. 
The truth is the picture is quite mixed around the regions.  
For most homeowners that have been in the market for some years, stress is very low with mortgage rates hitting some of the lowest levels in living memory, and this is reflected the unprecedented level of mortgage buffers that we saw in 2017.
But there are some parts of the country, including Perth, Gladstone, and a number of others, where employment opportunities have either been sparse or very sparse. 
Accordingly there have been some marked shifts in internal migration, as workers relocate to cities where employment growth has been stronger, most notably Melbourne in recent times.
In some cases, where households are in negative equity this may not be possible, and in it's in these situations where mortgage stress can become punishing. 
Fortunately there are relatively few pockets of Australia where negative equity is widespread, with many of the underperforming high-rise apartments owned by investors (including non-resident investors). 
Overall, while the picture remains mixed around the country, it has been consistent with a steadily improving labour market.
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.
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Sydney leads the country in wage growth: Pete Wargent

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Australia’s home loan affordability improved by 4.4 percent over the past 12 months, and was at 32.9 index points in March 2017, according to PRDnationwide’s latest figures.
Topping the Australian Home Loan Affordability Indicator was Australian Capital Territory (ACT) with an index reading of 49.7 points, well above the average of 32.9 points. 
In terms of increase, the Northern Territory led the way with 10.2% improved affordability (47.4 index points), followed by Victoria at 6.6% (30.8 index points), according to the PRDnationwide Key Economic Indicators.
The Q3 2017 Key Economic Indicators are a snapshot of the current state of affairs from an economic and property perspective, according to PRD and includes such statistics as  the number of loans to first home buyers, home loan affordability index, dwelling approvals and standard variable loan among others.
New South Wales, with an index reading of 27.7 index points, was the lowest. However, home loan affordability in NSW also grew by 3.7% over the past 12 months and is on par with Queensland (3.6%).
Consumer sentiment is a key indication of the general population’s confidence in the economy, whereby a higher index point reading suggests consumers are more willing to spend rather than save. 
Consumer sentiment remained under the positive line (100 index points) in August, currently at 95.5 index points. This was 5.5% lower since the last 12 months, and the lowest since then suggesting consumers are cautious, and  more willing to save than spend. 
Among other measures, the standard variable loan fell slightly to 5.2% this quarter, which PRD says should help in building consumer confidence over the next few months.  
Meanwhile, weekly median income also grew 2.2 percent in the 12 months to March to $1,688.
Median income rose in all states, with South Australia leading the way with a 4.1% increase to $1,545 per week. 
Consumer price index has decreased to 1.9 index points, suggesting goods and services are more affordable when compared to the previous quarter. This is good news for household income, and should further assist in increasing consumer sentiment.
However, affordability for first home buyers continues to be a concern, according to the real estate agency.
Over the past 12 months the number of loans to first home buyers in Australia rose to 20,677, an increase of 1.4 percent from 20,401.
Surprisingly the number of first home buyers have decreased the most in Tasmania, by 11.1% over the past 12 months, attributed to the increasing number of interstate investors taking advantage of Tasmania’s lower median property prices.
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Home loan affordability improved in 12 months to March: PRDnationwide

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<img src="https://counter.theconversation.edu.au/content/64539/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Last week saw a slew of economic data released in the US, Australia, and China.
Perhaps the most carefully watched was the US employment report, showing that the US economy added 151,000 jobs last month, leaving the unemployment rate unchanged at 4.9 percent.
This was a solid, not stellar result. But interestingly, the August report is notorious for being revised upward in later months. So the final number could come in higher if recent history is a guide.
The reason the jobs number was so closely watched was because many people – including yours truly – thought that another 250,000-ish gain would lead the Fed to a 25 basis point rate hike at their next meeting. That move by the Fed is still definitely possible, but the news lowered the odds a bit.
In another positive signal about the US economic recovery, the Conference Board’s consumer-confidence index rose to 101.1 in August, up from 96.7 in July.
Also positive was the Australian business investment plans for 2016-17. It beat expectations at $105 billion, although still down nearly 10% on the prior year.
ABS figures revealed a sharp jump in apartment approvals, with the July figure coming in at 11,393 – more than 15% higher than the previous year. This helped offset the 3% year-on-year decline in housing approvals. Still, apartment approvals in particular are lumpy, so it’s dangerous to read too much in to one month’s number.
On the less positive side, Australian retail trade figures were flat in July, putting the year-on-year increase at a modest 2.7%. This is on the back of just a 0.1% rise in June.
There was good news out of China, with the manufacturing Purchasing Managers' Index (PMI) up to 50.4, the best result since October 2014, and up from 50.0 the months before, also beating market expectations.
All in all this was a fairly positive week for global economies (especially if you forget about the basket case which is Europe).
There will be a good deal of central-bank watching over coming weeks, though. Philip Lowe takes over as governor of the RBA, and Guy Debelle was announced as his deputy – an excellent choice.
September 20-21 is the Fed’s Open Market Committee’s (FOMC) next meeting, which will be telling about the future path of interest rates – both in the US and Australia.
If the Fed hikes that will put downward pressure on the Australian dollar. The RBA seems uncomfortable with the current level of the local unit, and they would probably welcome a weakening, which would give them more wiggle room on their own cash rate.
And although it wasn’t “data” exactly, Prime Minister Malcolm Turbull recently reminded us of the benefits of free trade, in the leadup to the G20 Summit in Hangkhou. His admonition that “One important way in which the G20 summit can promote open trade policies is by assisting members to do a better job of measuring and communicating the benefits,” is well taken as populism seems increasingly the political order of the day around the world.
At least one piece of positive news surrounded the event, with China and the US ratifying the Paris climate deal on the eve of the summit.
Action on climate change and a boost for free trade would make for a very successful summit. Let’s hope our PM supports the former, not just the latter.
Richard Holden is professor of Economics and PLuS Alliance Fellow, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
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