Economics Blog   

The ABS Quarterly Labour Proce Index released this morning shows wages (excl bonus payments) rose 0.9% in the fourth quarter 2011 for an annual increase of 3.7%. This annual growth rate, while having fallen slightly from a year ago, remains at long term trend levels and is still well above the rate of inflation.
The data for Queensland shows wages there also rose 0.9% (q/q) and 3.7% (y/y).

The minutes from the RBA's meeting of Feb 7th were released this morning.
The meeting surprised most in the market (although not readers of this blog!) by leaving the Cash Rate unchanged at 4.25%. The minutes show that, whilst there is still concern that the European debt crisis could cause major problems in the future, these concerns had moderated since the Bank's Dec meeting. The Bank also noted the improvement in conditions in the US.
Domestically it is clear that the Bank were happy with their policy settings as they were; given that growth is now forecast at "about trend" for 2012-13, that inflation remains within target, "albeit in the upper half of the target range by 2014", and that unemployment remains steady at around 5.2%.
In keeping the Cash Rate unchanged the Minutes conclude that "if demand conditions were to weaken materially, the inflation outlook would provide scope for a further easing in monetary policy" (my emphasis). In essence the Bank is keeping its rates-powder dry in case of a significant worsening in the future. Unless Greece implodes or unemployment here rises rapidly we see little to encourage for further rate cuts in the next few months.
The markets have signifcantly weakened their betting on further rate cuts in the past week with futures now forecasting 4% by May when earlier this month they were pricing in 3.5% by mid-year. We never agreed with their earlier optimism for lower rates but are happier considering a 25bps cut by mid-year...if there is a need.

Data released this morning shows the unemployment rate dropped in Jan to 5.1% from 5.2% in the previous month. Markets had been expecting a small increase to 5.3% with only 10,000 new jobs created. In the end there were a huge 46,300 new jobs in Jan with full time jobs up 12,300 and part time up 34,000. The participation rate increased slightly to 65.3 (from 65.2).
In Queensland the increase was also dramatic with the unemployment rate dropping to 5.4% from 6.3% in Dec. Dec's sharp increase had been caused largely by a sharp rise in the participation rate (to 67.7) and Jan's decline has come on the back of a reversal of that increase with the participation rate falling back to 67.2.
Detailed jobs data for FNQ will be available next week at which time we shall update our seasonally adjusted series.

Data released last week by the ABS shows short term (less than one year) arrivals into Australia were up 0.1% on the year to Dec 2011 to an annual total of 5.9 million. Departures increased 7.1% during the year for a total of 7.7 million. This has created a new record gap between arrivals and departures for a 12 month period with departures topping arrivals by just over 1.8 million.
The lure of a weaker Euro has obviously tempted many Aussies with departures to France up 24.7% and to Southern Europe up 26.8% on the year to Dec 2011! The weaker US$ has also made trips to the States attractive with an increase of 12.1% to the US.

We are back in the office after a week in Singapore and are glad to report that the the RBA decision to keep rates on hold at their Feb 7th meeting was precisely as we had been arguing for some time (see here and here, amongst others). The futures markets had been pricing a 25bps cut as a near certainty and the vast bulk of commentators were agreeing.
Whilst the market may have been surprised by the RBA deciding to stand pat, we were not and readers of this blog should not have been either.

Data released overnight has shown an extra 243,000 new jobs were created in the US during Jan.
The higher than expected number brought the unemployment rate down to 8.3%, almost a three year low, from a revised 8.5% in Dec.
Job gains were widespread across most sectors with big gains in engineering and factory jobs.

Building Approvals in December fell a seasonally adjusted 1.0% (after an upwardly revised Nov increase of 10.1%). In the year to Dec approvals fell an adjusted 24.5%.
Queensland data was responsible for the vast bulk of revisions and came in with a 24.6% increase from Nov and unchanged from a year ago.

David Uren writing in today's Australian says "Reserve has no compelling reason to cut rates".
He argues, given the Bank said there was "no strong need to cut interest rates" in December, that there is less need now. We agree although the futures market doesn't; it is currently pricing a 25bps cut next Tuesday at 60%.

Data released overnight has shown the US economy grew at an annualised rate of 2.8% in the final quarter of 2011. This is an increase from the 1.8% growth seen in the previous quarter but was slightly below market expectations of 3%+ growth.

The IMF Global Economic Prospects paper developed for the G20 has revised growth forecasts downward.
The IMF now forecast world growth to come in at 3.3% this year with the advanced economies growing at just 1.2-1.3%. Australia is forecast to achieve growth of 3.0% this year (down from a previous estimate of 3.3%) which remains impressive when compared to many others G20 economies...US 1.8%, UK 0.6%, Canada 1.7%, France 0.2%, Germany 0.3%, Japan 1.7%, and Italy (alone amongst G20 nations) seeing a decline of 2.2% while the EU falls 0.1%.

Data released this morning shows the headline CPI flat for the Dec quarter for an annual rise of 3.1% (down from 3.5% in the previous quarter). The big movers in the quarter were food (-1.5%), clothing & footwear (-0.5%), health (-1.2%), communications (+1.1%), alcohol & tobacco (+0.9%) and recreation (+0.8%).
The RBA however will be far more focussed on the core inflation data (which strips out volatile movements). The Trimmed Mean measure of inflation came in at +0.6% q/q and +2.6% y/y which is broadly in line with market expectations and almost smack in the middle of the RBA's 2-3% target range. Q3 core inflation was revised up from +0.3% to +0.4%.
While this data will certainly have done nothing to persuade the RBA NOT to cut again at their next meeting in Feb, we do not believe that it makes any such cut any more likely. With inflation firmly in the centre of their target range, fears in Europe easing and monetary policy currently sitting at a neutral position (as admitted by the RBA in previous minutes) we will not be surprised if the Bank holds off from another cut this time around.

Data released by the ABS this morning shows the employment position in FNQ improved in Dec. The headline unemployment rate fell from 9.2% in Nov to just 6.5% in Dec.
This came as the number employed fell by 500 while those unemployed also fell sharply by 4,400. The reason for this seeming disconnect is the Participation Rate which fell from 69.6 to just 67.2. These non-seasonally adjusted (and highly volatile) figures compare to a static nationwide unemployment rate of 5.2% and a rate in QLD of 5.4% (down from 5.7%).
The Conus seasonal adjustment of the data also paints a healthy picture with the seasonally adjusted rate of unemployment falling to just 5.1% (down from 6.9%) with the number employed stable, while the number unemployed fell by 4,000. We should caution that with only 4 years of data for FNQ this seasonally adjusted series is itself liable to significant revision as times go by. However, what it shows is a clear trend of a falling unemployment rate in the region from the peaks seen in Q4 2009.

The IMF have revised downwards their forecasts for world growth this year and next.
Growth in 2012 is now expected to come it 3.3% with an increase to 3.9% in 2013. While these are significant downgrades it is perhaps worth remembering that world growth has averaged between 3.4 and 3.5% over the past 20, 30 and 40 year periods (this courtesy of Craig James at CommSec).

Data released this morning by the ABS shows that the percentage of long-term unemployed (those out of work for a year or more) increased slightly in July last year from a year ago.
In July 2011 19.2% of those unemployed had been looking for work for a year or more; this was up from 18.4% in July 2010. However, back in 2003 and 2004 the rate was over 21%. This measure fell to just 15.1% in July 2008 and has been increasing gradually since.
The median length of time that the unemployed are out of work remained unchanged at 14 weeks.

Data released this morning shows the seasonally adjusted unemployment rate in December at 5.2%. This is unchanged from a revised (previously 5.3%) rate in November.
However, the detail shows that a total of 29,300 jobs were shed (all of which, and more, were part-time positions. Full-time jobs were up 24,500) and the reason for the steady unemployment rate is the sharp drop in the participation rate (from 65.5 to 65.2). More people have simply removed themselves from the available labour force and are therefore not counted as "unemployed".
In Queensland the unemployment rate fell to 5.4% (from 5.7%). Total jobs fell 3,300 while full-time positions were up 6,300. As was the case elsewhere, the participation rate fell; from 67.4 to 67.0.
Detailed jobs data which will include figures for Far North Queensland will be released next week.